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What the 2021 budget has in store for the property sector

As the new year approaches, the highly-anticipated national budget for that year is sure to follow. In 2020, there have been mixed views from the market players in Malaysia's property sector.

This is due to the current situation which has seen many affected by the Covid-19 pandemic as well as political uncertainties. As a result, many believe that the Malaysian property sector will face some difficulties; this might not necessarily change in the coming years.

On November 6, Finance Minister Tengku Zafrul Tengku Abdul Aziz announced the country’s 2021 Budget. Among the allocations for the property market are various measures to increase homeownership. Some believe that they are “convincing” in improving the sector’s prospects.

Here are three initiatives regarding Malaysian property that many can look forward to:

Full Stamp Duty Exemption for first-time house buyers or residential properties 

This spells good news in the property market for local Malaysian homebuyers who aim to buy a home for the first time. The government has announced a full stamp duty exemption up to 2025 for the Memorandum of Transfer (MOT) as well as Loan Agreements (LA) for first-time house buyers of residential properties valued up to RM500,000.

The exemption is only applicable for the sale and purchase agreement of the first house on purchases completed from January 2021 to December 2025.

The stamp duty exemption by the government will also be extended as it pertains to loan agreements and instruments of transfer given to rescue contractors and original buyers of abandoned houses for another five years.

Previously, Prime Minister Muhyiddin Yassin announced a similar stamp duty exemption under the HOC 2020 (Home Ownership Campaign) during the short-term economic recovery plan for Malaysia’s property market. It will be valid until May 2021 but is only applicable to new launch properties.

However, according to the latest updates stated in the 2021 budget, there will be more opportunities for property seekers to explore the secondary market. Therefore, homeownership in Malaysia will be increased.

Rent-to-Own scheme

The government will also implement a Rent-to-Own scheme for first-time home buyers. The scheme will involve 5,000 selected 1Malaysia Housing Program (PR1MA) properties valued at up to RM1 billion; it will last until 2022. For young working professionals who aim to own a home but do not have the financial ability to pay for the property’s down payment, the scheme represents an opportunity for them to buy one at a young age.

It is still unclear what the RTO scheme will involve. However, it is known that it will be carried out on a lease-purchase contract between the buyer and the developer. Buyers will first have to rent a property with an option to purchase at the end of the contract period. This period’s duration will range from five to 30 years.

One advantage of the scheme is that the buyer will be able to pay the property’s purchase price based on the current selling price.

Stamp exemption for buyers of abandoned housing projects extended

Last but not least, in the midst of a pandemic, the extension of a stamp exemption for buyers of abandoned housing projects may ease the burden of those who are affected by abandoned projects. Such people include contractors and original purchasers of abandoned projects.

The proposal will be able to further motivate property developers and contractors to complete work on abandoned units and reduce the financial burden of affected house purchasers. As for original purchasers, the exemption applies to instruments of loan agreements for additional financing and instruments of house transfer.