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Knight Frank: PENJANA incentives to stir property market

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Press Release: PENJANA incentives to stir property market

9 June 2020, Malaysia – The Prime Minister, Tan Sri Muhyiddin Yassin has recently unveiled the RM35 billion Short-Term Economic Recovery Plan (PENJANA) to address the economic challenges of COVID-19. Consisting of 40 initiatives, the latest plan which is Stage 4 of the 6 stages in the Government’s 6R Strategy, aims to to empower the people, propel businesses and stimulate the economy.

Knight Frank Malaysia applauds the government’s slew of initiatives to secure the nation’s wellbeing by promoting economic growth while reducing fiscal deficit during this unprecedented time. 

Residential

Sarkunan Subramaniam, Managing Director, Knight Frank Malaysia (header image), says, “The reintroduction of Home Ownership Campaign (HOC) effective 1st June 2020 until 31st May 2021, where stamp duty exemption will be provided on the instruments of transfer and loan agreement for the purchase of residential units priced between RM300,000 and RM2.5 million and limited to the first RM1 million of the home purchase price, is expected to kick-start the primary housing market moving into second half of 2020 and beyond. With developers generally focusing on clearing existing stock and holding back new property launches at this moment, the return of the HOC will likely act as an immediate catalyst to address the current property overhang and help in easing cash-flow worries for the developers.

“Meanwhile, the exemption of Real Property Gains Tax (RPGT) for disposal of residential units between 1st June 2020 and 31st December 2021 and limited to three units per individual, will provide further traction to the secondary housing market. While concerns on property speculation may rise but with the short window period of exemption, it helps to provide added financial relief to individuals who needs to liquidate their assets during this trying time.

“We are also positive on the comeback of certain category of qualified investors to the property market with the uplifting of margin of financing limit for the third housing loan onwards for property valued at RM600,000 and above during the revived period of the HOC campaign. As the Malaysian property market was already in a prolonged slowdown due to economic challenges and political uncertainty, these initiatives will help to restore confidence of property investors and ultimately contribute to the growth of economy.”

Manufacturing

PENJANA also provides generous tax incentives to attract foreign companies to relocate to Malaysia. Allan Sim (沈颂能), Executive Director of Capital Markets, Knight Frank Malaysia believes the incentives are timely in capturing Foreign Direct Investments (FDIs) from the US-China Supply Chain Reconfigurations. Earlier incentives such as the likes of Pioneer Status and Principal Hubs are varied across different sectors and generally dependent on fulfilment of certain conditions, i.e. creation of high value jobs, number of qualifying services housed within Malaysia, etc.

Sim comments, “From the current standpoint, qualifying criteria under PENJANA are simplified to the value of capital investments, with a more generous tax holiday period of up to 15 years for corporates with capital investments of more than RM500 million. This coupled with the fast track approval mechanism for manufacturing licences and tax incentives with the establishment of Project Acceleration and Coordination (PACU) under the Malaysian Investment Development Authority (MIDA) will help to raise the country’s attractiveness in the eyes of foreign investors.”

With these timely incentives, Malaysia is poised to be a beneficiary of the on-going major restructuring of global supply chains arising from the aftermath of the pandemic, as well as the US-China trade war.

Sim added, “Post COVID-19, we expect to see more major companies looking for ways to diversify and decentralize their supply chains across countries and regions to mitigate geographical risks on production lines / material sourcing. The decoupling of US-China supply chains is also evident as trade tensions continue to intensify. As companies explore relocation of some of their operations in efforts to navigate through the on-going trade conflict, these new incentives under PENJANA will help position Malaysia as a strong contender in seizing these relocation opportunities as well as next shoring for their manufacturing businesses.”

Sim is also positive on the outlook of the industrial property market moving forward; the tremendous efforts by the government in promoting the FDIs will help sustain employment and the country’s economy at large.

“The promotion of FDIs are also lauded by players in the market as it will generate a multiplier effect in boosting Malaysia’s Gross Domestic Product (GDP) and help to create more employment opportunities. As it stands, the manufacturing sector is the second largest contributor to the nation’s GDP and its growth will help bolster the economy amid this unprecedented crisis.

“In conjunction with the above, we are also likely to witness a positive spill-over effect in the industrial property market predominantly in larger purpose-built factories / large tracts of industrial lands, with the potential entry / relocation of new global industrial players. The logistics and real estate sectors will benefit by way of demand from set-ups of new manufacturing operations”, Sim concluded.

Hospitalism / Tourism

The hospitality and tourism sector came to a standstill amid the global pandemic and the enforcement of Movement Control Order (MCO) since 18 March. With travel restriction, event cancellations and individuals’ reticence to travel, many hotels and operators are forced to close down or downsize operations, resulting in tens of thousands of job losses.

Sarkunan Subramaniam, Managing Director, Knight Frank Malaysia, says, “The allocation of RM1 billion PENJANA Tourism Financing (PTF) facility serves as a ray of hope to the tourism sector, to support the transformation initiatives for small-and-medium sized enterprises (SMEs) in the tourism sector to remain viable and competitive in the new normal.

“Boosting domestic tourism is crucially important as well during this challenging time as the tourism sector was the biggest contributor to some of the states’ GDP. The personal income tax relief of RM1,000 for domestic tourism expenses until 31st December 2021 will help to encourage more domestic travel and revive the country’s tourism sector in the short to medium term. 

“In addition, the existing service tax exemption for hotels will be extended to 30th June 2021, and a new exemption for tourism tax from 1st July 2020 to 30th June 2021 has been introduced. This will most likely to encourage more tourism activities in the country for the next twelve months, as the exemption of both tourism tax and service tax will certainly reduce the cost of hotel stays for both local and foreign travellers.”

— end of press release —

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