The changing legal landscape of the property sector in 2014

Lawyer Khairul Anuar writes on the changing legal landscape of the property sector in 2014.

THE property sector received a big jolt when a few measures in Budget 2014 were implemented to put a brake on the overheated property market. It was said that too many people were buying properties in the hope of making fast cash by selling them immediately upon purchasing units from housing developers. Housing developers were said to be making loads of profit by packaging the houses they sell with the Developer Interest Bearing Scheme (DIBS). Banks also made a killing as DIBS needs their participation to be successful. Lines were snaking around the block at most residential property sales launches.

All these came to a halt when a few measures were introduced to the property market with 2014 as the starting point. Will the property sector experience a slowdown or, will it be business as usual? What is the new legal landscape for the property sector? DIBS or any such form of schemes where the housing developer helps the buyers to purchase the property contrary to how payments are supposed to be made as set out in the Sale and Purchase Agreement (SPA) in the Housing Development (Control & Licensing)Regulations 1989 are now prohibited.

Currently, housing projects that come with the new Development Order (DO) are prohibited from offering DIBS. Projects that are still offering DIBS are those that have obtained their DOs before DIBS was prohibited. Real Property Gains Tax (RPGT) is now raised to 30% for any property owner who disposes the property after holding it for less than three years; 20% for disposal between three and four years, and 15% for disposal between four to five years. Upon reaching the sixth year, RPGT will not be imposed on locals. Foreigners and companies will still have to pay 5% of the RPGT. It is a bit more than the tiered system of RPGT that was imposed before April 2007. Foreigners are not allowed to purchase properties below RM1mil.
There are rumours that this imposition is deferred until April 2014. However, there are states in Malaysia such as Penang which has imposed its own measures in restricting sales of properties to foreigners to above RM1mil. The amount imposed before this measure was implemented in Budget 2014 was RM500,000. Each state in Malaysia has its own threshold of sale to foreigners depending on the areas the houses are being built.
Other than the measures in Budget 2014, people should be aware of the highly awaited Strata Management Act 2013 which will supersede the Building and Common Property (Maintenance and Management) Act 2007. Gazetted last year but still awaiting all states in Malaysia to endorse it in order for it to be implemented, this will streamline the issuance of strata title by making it faster for an owner to obtain it from the housing developer. Besides this, it will impose higher penalties for non-compliance, put more responsibilities on the housing developer for the strata buildings and make sure the management of strata properties is more responsible.
>> Khairul Anuar is a practising lawyer who is also an author of books related to property law.

For more information on Building and Construction event, please visit www.asiapacificevents.com