DEVELOPERS in Malaysia's red-hot development region Iskandar are still struggling to understand the country's new property curbs, some three months after they surprised the market.
They are not the only ones. Phones have been ringing off the hook at the sales offices of some popular property projects.
Potential buyers, particularly foreigners, have been desperate to seek clarity on how the new rules affect them or if they do.
"We were given sketchy guidelines on the new rules with lots of disclaimers, which means many of these rules are still being tweaked," said an executive from a firm with a major development in booming Iskandar, three times the size of Singapore.
"So, we are unable to provide any definite answers to our customers," he said.
Last October, Malaysia slapped curbs countrywide to cool the country's spiralling property prices, ostensibly caused by enthusiastic foreign buyers.
This has turned into a political hot potato, particularly in Johor.
Foreign buyers felt the sharpest sting. A big proportion of them are Singaporeans who have been drawn to Iskandar by its proximity to Singapore, the prospect of spacious homes and the strength of the Singdollar.
From this year, real property gains tax for foreign buyers has been lifted to 30 per cent on property sold within the first five years of ownership. After that, they pay 5 per cent on gains.
Also, the minimum price of properties that can be purchased by foreigners was raised from RM500,000 (S$193,500) to RM1 million per unit.
Yet, the lack of clarity on the cut-off period involved and which projects are affected by these new rules has left many unhappy.
"Many of my clients, particularly from Singapore and Japan who invest significantly in Malaysian properties, have no patience for such ambiguity or frequent changes," said Mr Marc Naidu, director of Hampton Peak, a tax and accounting firm which offers services to individuals and small and medium-sized enterprises in Singapore and the Iskandar region.
No surprise then that confusion reigns among the builders. "If they have rules that allow foreigners to buy properties that are worth only RM1 million and above, that's fine. But we need to know if this applies to projects that have already been designed and approved or those that haven't," said one builder.
Some clarity on this point is especially crucial for developers. For example, if the new rule on a higher minimum price for purchases by foreigners applies to a certain project, the developer can build bigger units and price them accordingly - RM1 million and above - to woo foreign buyers.
"One way of overcoming the issue is by building larger units. After all, our earlier surveys revealed that foreigners, especially Singaporeans, much prefer to buy bigger units," said Mr Danny Heng, who helms Infinite Rewards, a private vehicle of Malaysian tycoon Danny Tan.
Infinite is injecting huge tracts of Iskandar land for development into Singapore's Catalist-listed Albedo through a $1.9 billion reverse takeover.
Many are displeased. "Having to redesign our projects just under a year before we are ready to launch to accommodate these new rules is painful. But we are caught as we're not sure if we need to do it, and the clock is ticking," said an executive of a real estate firm with a sizeable project in Iskandar, declining to be named.
Some are not so bothered. Mr Ho Kiam Kheong, executive director of Singapore-listed Rowsley, partly owned by billionaire Peter Lim, does not expect the new curbs, including the higher capital gains tax, to affect Vantage Bay.
Mr Ho is confident that the project, a $2.2 billion integrated development in the Johor Baru city centre comprising twin-tower condominiums, will draw genuine buyers aiming to hold the properties for at least five years.
As for the new minimum price threshold for foreign buyers, Mr Ho said the firm is working with the authorities to "ensure there is clarity for our buyers and stability in the market".
Medini, Iskandar's only node and showcase integrated zone in Nusajaya - a proposed city within the Iskandar region - is exempt from the tighter rules.
News that the Malaysian government will soon announce three more nodes which will enjoy such tax breaks is raising hopes among some developers.
"Of course, we are hopeful of getting the exemption as ours is a catalytic project," said the boss of a big property firm.
Insiders expect news on that front within weeks. As surprising as the new rules were, some say they were expected. Mr Manu Bhaskaran, chief executive of Centennial Asia Advisors, said: "The real estate sector in Iskandar had been getting a bit bubbly and long-term investors should know that such policy responses are needed and should be expected."
It is not the rules that appear to irk market participants as much as their vagueness.
"Clarity is key. Goal posts should not keep moving. It's okay if a new rule applies to buyers buying after a certain date, but if it applies to buyers that bought under different rules, that may be hard to accept," said Mr Naidu.
This story was first published in The Straits Times on Jan 13, 2014
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