Monday, March 19, 2007

RPGT To Be Removed

Guess The Motivations - Bending Over Backwards

It is very likely that an announcement will be made during the Invest Malaysia 2007 conference later this week. It is felt that the abolishment of Real Property Gains Tax will help draw real estate investors to the Iskandar Development Region in south Johor. The RPGT structure was last revised in the mid-1990s amid a hot property market. The RPGT is presently assessed based on a percentage ranging between 5% and 30%, depending on how long the seller has held the property. For Malaysian individuals, there is no RPGT if the property is disposed of after five years. For foreigners, a flat rate of 30% is applicable within five years from the purchase of the property, and 5% on the sixth and subsequent years. As such, it is easy to see why it has been argued that a relaxation on RPGT can trigger a re-rating of the property sector.

The Government has been easing restrictions on foreign buyers in recent times. As an indication, foreign purchasers will be allowed to buy houses and condominiums priced above RM250,000 per unit without the approval from the Foreign Investment Committee. On top of that, foreigners will also not be subject to any conditions in terms of usage or limit on the number of properties purchased. It looks pretty obvious that the ground is being prepared for the IDR as regional Asian investors need to be lured by similar tax conditions to partake in the IDR. Its also probably a precondition by HK and Singapore companies before they plonk down funds and resources to develop IDR.

That's probably the last hurdle for Asian property retail investors, no RPGT and a bullish outlook on the ringgit, the IDR would look very attractive to HKers and Singaporeans, particularly if they also see Cheung Kong and Capitaland moving to IDR in a big way.

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