08 November 2014

Uniform land legislations will be a boon for real estate

  08 November 2014

GREATER uniformity on legislations concerning land matters between the federal and state governments to standardise the entire development process and land matters nationwide will promote a more structured growth in the real estate sector, industry observers say.

According to Malaysian REIT Managers Association chairman Datuk Stewart Labrooy, a uniform framework for real estate policies, and one that is without too many variations and variables, will be good for the growth of the industry.

“There are just too many differences among the various state regulations that make it difficult for developers to navigate,” Labrooy tells StarBizWeek.

He says land is a state matter and that each state has its own set of “state land rules”, and to bring about change there is a need to revisit and amend the Ninth Schedule of the Federal Constitution of Malaysia 1957.

The Federal Constitution prescribes two-tier governmental structure, i.e the federal and state governments. The Constitution delineates and demarcates the sphere within which the two levels of government operate in terms of matters relating to land.

The Ninth Schedule of the Federal Constitution determines the powers of both the federal and state governments. The Constitution allows federal intervention in land matters to promote uniformity of law and policy.

Article 76 Clause (4) (Federal Constitution, 2008) mentions that the Federal Government has the power to ensure uniformity of law and policy such as to make laws with respect to land tenure, registration of titles and deeds relating to land, transfer of land, mortgages, leases and charges in respect of land, and local government.

However, Article 74 and Second List (State List) in the Ninth Schedule stresses that the legislature of a state may make laws with respect to any of the matters enumerated in the state list.

VPC Alliance Sdn Bhd managing director James Wong says uniformity of real estate policy framework, although the right step forward, is not easy to implement as it involves agreements of the 13 state governments and the Federal Government.

Land a state matter

“Under the Federal Constitution, land is a state matter. Control of land use and issue of land titles and land development such as subdivision, partition, land acquisition, amalgamation and surrender and alienation are all under the purview of the state governments under their respective land offices,” Wong says.

CB Richard Ellis group executive director Paul Khong says there must be a proper consensus at the federal and state levels to fully agree to a common real estate policy framework and that for the real estate uniform policy framework to work, “there must be a full buy-in from all states with a real will to follow it through consistently.”

Khong says the National Land Code 1965 is one of the existing efforts to coordinate all general land matters under one common code for the country, but it may not have covered all land matters and policies.

Labrooy says although the National Land Code was designed to bring uniformity and consistency in each of the state and have a general guideline which is applicable to all, “there are still some inconsistencies on the titles and on various land matters in east Malaysia and the peninsula, the calculation of premiums in each state, first grade titles in Penang, native titles in Sabah, and many other land issues.”

He says initiative by the National Physical Planning Council to work towards a more uniform set of rules regarding land matters will be a good start.

Supportive ecosystem

The functions of the council are to promote, within the framework of the national policy, town and country planning as an effective and efficient instrument for the improvement of the physical environment and towards the achievement of sustainable development in the country; to advise the Federal Government or the government of any state, on matters relating to the town and country planning required under the Act; and to perform any other functions conferred upon the council under the Act.

While the measure may have some way to coordinate land matters on a macro scale in the various states, the plans for the use of land and all land matters will remain firmly a state matter.

However, Labrooy does not believe policy is a means to an end.

He says the competencies of state planners and state governments, transparency of decision-making, and engagement with citizens when major plans are to be implemented that affect the communities will have a far greater bearing on how states develop.

“Many local authorities have prepared detailed draft structure plans but find it hard to implement as all land are privately owned and in many cases the matter becomes a waiting game,” he says.

Infrastructure spending

He cites the case of high density developments being approved without a thought to upgrade the surrounding infrastructure, adding that local authorities do not focus on infrastructure spending enough to make their respective towns liveable and encourage sustainable developments.

“Time to market is an issue for most developers as approvals for projects can take time from land conversion to planning and building approvals, as holding costs can be quite punishing. Policy changes on issues like affordable housing allocations, bumiputra discounts, price controls for sales to foreign purchasers, and cooling measures have added further challenges to the industry,” Labrooy says.

Efficiency will bring great benefits to growth, but issues like affordability, rocketing land prices and overbuilding are all storm clouds on the horizon and will have a real impact if not addressed.

Labrooy says the thinking that high growth will come from the services industry is a myth, “unless we refocus on attracting more high-end industries to Malaysia we will not be able to create the high paying jobs that will bring true wealth to the nation. This should be a top priority.”

“We have all the infrastructure in place – we just need to create the ecosystem to attract companies to set up here and in doing so create employment opportunities for our graduates,” Labrooy adds.

He says there is nothing stopping Malaysia from being a regional property hub as its tentacles run deep into the heart of the economy.

The supply chain in the real estate sector is massive – developers, material suppliers, consultants, financial institutions, contractors, construction workers, Bursa Malaysia, real estate agencies, valuers and local governments.

Khong concurs, saying Malaysia stands fairly attractive as a property hub in the region as it has a robust land title system, and mild but restrictive policies on promoting foreign ownership in various categories of properties.

He says the tax rates such as real property gains tax (RPGT) and income taxes are still within good and acceptable range with the latest changes in Budget 2015, and the exchange rate of the ringgit is still attractive.

“However, the frequent changes in RPGT rates, foreign ownership policies and tighter financing guidelines may affect the real estate potential going forward,” Khong cautions.

~ By THE STAR
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