On 11 October 2019, Malaysia’s Finance Minister announced the much-anticipated Malaysia Budget 2020, tabling out the plans and initiatives to be taken by the government as well as respective institutions in progressing Malaysia. Among the various categories discussed, real estate was one of the more prominent industries to be focused on. There are several ways in which the Malaysia Budget 2020 grants more feasible opportunities for Malaysians, especially first-time buyers as well as young families, to purchase their dream home through newly introduced and improved initiatives. Here are some of the examples:
Rent To Own (RTO)
Through the RTO scheme, the government will collaborate with financial institutions in order to assist those who are unable to afford the initial 10% down-payment fund required to purchase property. The initiative states that up to RM10 billion will be provided by financial institutions with support from the government via a 30% or RM3 billion guarantee.
According to Finance Minister Lim Guan Eng, the RTO scheme was dedicated towards the purchase of first homes, with a property value of up to RM500,000 whereby applicants are allowed to rent the property for up to five years and following the first year, the tenant will be granted the option to purchase the property. It was also added that the value of the property would be based on the price agreed upon at the time the tenancy agreement was signed. Besides that, the government would also provide stamp duty exemptions between the developer and financial institutions, and between financial institutions and the prospective buyer.
Youth Housing Scheme
Other initiatives included the extension of Bank Simpanan Nasional’s Youth Housing Scheme from 1 January 2020 to 31 December 2021, where successful applicants would be able to enjoy a 10% loan guarantee through Cagamas, enabling borrowers to obtain full financing as well as receive RM200 monthly installment assistance for the first two years, limited to 10,000 home units.
In addition to the Youth Housing Scheme, other initiatives such as the Fund for Affordable Home, introduced in January 2019 aims to aid lower-income group in purchasing their first homes at a concessionary interest rate of up to 3.5%, catering to households with a maximum monthly income of RM4,360, representing the B40 group. It is also worth noting that through the Malaysia Budget 2020, the value of properties covered under the initiative was increased to RM300,000 from RM150,000 previously. The government also presented a six-month extension for the Home Ownership Campaign, where developers who provide a discount of at least 10% for qualified properties will be matched with stamp duty exemptions.
Real Property Gains Tax (RPGT)
RPGT, a form of Capital Gains Tax imposed by the Inland Revenue (LHDN) is chargeable upon profit made from the sale of land or property, where the resale price is higher than the purchase price.
3 Tiers of RPGT:
Individuals (Citizens/Permanent Residents)Individuals (Non-Citizens)Organisations In the Malaysia Budget 2020, an RPGT amendment was to grant a relief to property seller. It was decided that as of 2020, for the calculation of property gain tax of units purchased before 2013, the Government will use the market price on 1 January 2013 as the initial point of valuation as opposed to the previous RPGT scheme where the base year was determined to be at 1 January 2000. As RPGT is charged based on the profit made from a sale, a later base rate would mean a lower calculated profit, hence reducing the property seller’s tax burden.
Other initiatives:
The Reduced Threshold for High-Rise Properties is catered especially to foreigners, where the threshold for foreigners to purchase urban high-rise properties has been reduced from RM1 million to RM600,000 next year as an effort to reduce supply overhang of condominiums and apartments amounting to RM8.3 billion in the second quarter of 2019. While this initiative caters more towards foreigners, the reduced price would apply only for a year for existing unsold condominium apartments, and would not cover new projects. Therefore Malaysians need not worry about an influx of foreigners residing in the country, and instead should view it as an effective solution for the country to manage overhang high-rise properties and in return, grow the Malaysia’s economy. Based on the initiatives proposed through the Malaysian Budget 2020, it is presumed that a rise in Malaysia’s real estate industry will be observed. If you are looking to purchase a home, perhaps the year 2020 would be the ideal year to do so, and we would be more than delighted to help you. Do give us a call at +60 19-275 8200 to start your journey in finding your dream home.