Budget 2024 – What’s In It for Property Developers and Realtors?
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The RM 393.8 billion allocation under the recently announced Budget 2024 allocation represents a modest increase compared to the previous budget, which stood at RM388.1 billion announced in February 2023. The budget's theme underscores a commitment to empowering the nation's citizens and fostering economic growth in the coming fiscal year.
However, Budget 2024 presented a mixed bag for the real estate segment. It begs the question – how would the budget impact the primary and secondary markets, and consequently, property developers and realtors?
Revival of Sick and Abandoned Projects
The government has earmarked a "special assurance fund" of RM1 billion to encourage established property developers to reinvigorate specific abandoned projects.
This year, a specialised task force was deployed under the purview of the Ministry of Local Government and Housing Development (KPKT), to address the issue of stalled, ailing, and deserted private housing projects.
In April, KPKT’s special task force dealing with abandoned or "sick" housing projects in the country identified 141 delayed property projects, 481 sick projects, and 112 abandoned projects. By August, this initiative successfully rejuvenated 256 stalled housing projects, encompassing 28,000 housing units, with a combined gross development value of RM23.37 billion.
Public Housing
In 2024, the government has earmarked RM2.47 billion for public housing projects (PPRs). Of this allocation, RM546 million is dedicated to the continued maintenance of 36 PPRs, including a new project in Kluang, Johor. Additionally, 15 more PPRs are slated for completion in the upcoming year.
RM385 million has been set aside to construct 14 affordable housing projects, known as "Program Rumah Mesra Rakyat," which will provide 3,500 housing units.
RM100 million is allocated for maintaining low- and medium-cost stratified public and private housing nationwide. This fund will cover repair works on various elements, including water tanks, roofs, wiring systems, and security enhancements such as CCTV installation. Another RM100 million has been allocated to enhance infrastructure and community facilities in Chinese New Villages.
A significant RM2.4 billion has been earmarked to finance the construction, improvement, and maintenance of housing facilities for civil servants, teachers, hospital staff, and personnel from the police, army, and fire brigade forces. This falls under the purview of The Special Task Force on Agency Reform (STAR).
Permodalan Nasional Bhd (PNB) is set to manage Pelaburan Hartanah Bhd, supported by the government's strategic land contribution for housing projects in Kuala Lumpur.
Foreign Investors and Homebuyers
The government has opted to review and relax the existing criteria for Malaysia My Second Home (MM2H) applications to encourage an increased influx of foreign homebuyers into Malaysia.
The MM2H programme has seen a 90 per cent drop in applicants since 2021, owing to stricter conditions that have forced foreigners to choose other neighbouring countries, such as Thailand, which offers a similar programme known as the Thai Elita Visa.
Depending on the extent of the relaxed criteria to be announced, the anticipated positive adjustments could spur the primary and secondary markets by attracting more foreign property buyers and alleviating the property overhang. This is especially relevant in popular destinations for foreign residents, notably Kuala Lumpur, Johor, and Penang. However, the imposition of a 4% stamp duty on foreign buyers may curb demand by some measure (see next paragraph).
Stamp Duty on Real Estate Transactions
Real estate agents and negotiators in the subsale market may see an uptick of homeowners with properties above RM 1 million looking to dispose of their property, particularly if it acquired through inheritance.
Currently, the exemption from stamp duty on property transfers between parents and children and between grandparents and grandchildren applies to the first RM1 million, with a 50% discount on the remaining amount above RM1 million based on the ad valorem duty rate.
In 2024, a fixed stamp duty fee of RM10 will be introduced to replace the prior variable rate for real estate transfer documents. This adjustment will be relevant to cases where beneficiaries renounce their entitlements to eligible recipients as stipulated by a will, Faraid, or the Distribution Act 1958.
As part of an effort to regulate property prices, the government intends to implement a flat-rate stamp duty of 4% on memorandum of transfers for property purchases by foreign individuals and companies, with the exception of permanent residents.
Housing Credit Guarantee Scheme
In 2023, the program received RM5 billion in funding to support up to 20,000 borrowers without a stable income from the gig economy in accessing loans.
As we move into 2024, an allocation of RM10 billion will be allocated to extend the Housing Credit Guarantee Scheme, offering assistance to 40,000 borrowers falling within this specific category. This would make low-cost housing more accessible to this segment of the population.
En-bloc Sale
In order to streamline the redevelopment of strata schemes, the requisite approval threshold from residents for en-bloc sales plans to be adjusted, moving away from the current 100% requirement to a level more in line with international standards, much like what is observed in Singapore.
This modification aims to foster urban revitalisation and incentivise the redevelopment of aging structures within urban areas. Alongside the benefits regentrification can have on the value of the surrounding properties, it also opens up more possibilities for property developers, who previously had to grapple with securing consent from all residents.
High-tech Industrial Developments
To stimulate foreign investment, the government intends to create a state-of-the-art high-tech industrial center in Kerian, North Perak. This initiative aims to develop further the electronics and electrical (E&E) cluster ecosystem in the northern region, adding to the already established industrial zones in Bayan Lepas, Penang, and Kulim Hi-Tech Park, Kedah. These investments also have the potential to spill over into the housing market as employees relocate to pursue job opportunities.
2026 has been designated as ‘Visit Malaysia Year’plus an RM 350 million allocation to boost tourism activities could have a positive spillover effect on the property market. Malaysia is preparing to receive an anticipated 26.1 million foreign tourists by 2026, expected to contribute approximately RM97.6 billion in domestic expenditures. Businesses may seek to capitalise on this and this could in turn spur property rentals or sales in key tourist areas - but a more pronounced impact might be seen in 2025 instead of 2024.
In addition, a fund of RM20 million has been earmarked for Think City to rejuvenate and transform downtown Kuala Lumpur into a vibrant creative hub. With proper execution, such efforts can serve to boost value of surrounding properties in the secondary market and add to the appeal of new properties.
Conclusion
While Budget 2024 might be a mixed bag for the real estate sector, stakeholders and market players in the industry must stay attuned to the latest developments and seize the opportunities presented. Property developers and realtors can thrive in an ever-evolving and dynamic market by aligning with the government's priorities and adapting to market conditions.
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