Seeking a solution

Developers continue to face uphill task in projects

Confidence is certainly in short supply in these times of gloom but it is what is needed if the country is to get out from the rut of the spiralling global financial quagmire.

During unprecedented crisis times like these, a strong leadership is paramount to make the most of the situation and ensure confidence returns to the people and businesses as it is the foundation for an economic recovery.

The second stimulus package or mini-budget to be announced on Tuesday (March 10) hopefully have all the right ingredients, including measures such as tax rebates and other direct incentives for Malaysians, to instil confidence in them and businessmen in order to arrest the slide in local demand and the economy.

While most countries have already been submerged by the US-led financial tsunami, Malaysia can still count on its many resources – resilient, prudent and hardworking Malaysians; talented human resources; world-class infrastructure and vast natural resources, to steer the ship (hopefully safely) across the stormy waters of these highly globalised world we are in today.

Nevertheless, the signs that the country is also being gradually sucked into the widening global crisis are already showing and a recession cannot be discounted.

Instead of being alarmed or worse, to be in denial of such a possibility, it is best to face this reality with a high level of preparedness by harnessing all the strengths and resources at our disposal.

There is certainly a dire need for more enabling government policies that will complement the initiatives of the private entrepreneurs and businesses to ensure the country’s economy will not succumb to a long and gruelling hard landing like what many other countries are now in.

Given the magnitude of the damages wrecked by the global financial crisis since it unfolded in the middle of last year, the country’s leaders, at both the Federal and state levels, should by now have realised the fragility of Malaysia’s economy and have introduced more flexible and business-friendly measures aimed at raising the country’s competitiveness in the various industry sectors.

There is much to be done to ensure Malaysia is fully prepared to face the onslaught of the full scale of the global crisis, which is expected to go into next year. A speedy, efficient and transparent implementation and disbursement of the funds under the two stimulus packages are most critical to ensure these measures work to arrest a widespread decline in the economy.

In the case of the property sector, property sales has almost ground to a halt while new project launches have plummeted by more than 50% in the last two quarters of last year compared with the same period in 2007. This year, more projects are expected to be deferred as the economy worsens.

Industry players are finding it hard to surf through these current difficult times and their woes are further amplified by the strict imposition of various government policies, such as the bumiputera housing policy. Given the rising number of unsold bumiputra units, the policy has resulted in increased financial burden for developers to bear the high holding cost, which inadvertently is passed on to other future buyers.

The bumiputera quota has long been a requirement in the local housing scene. Developers have to reserve 30% of available units in a housing scheme for a period of six months for purchase by bumiputeras at a discount of 5%-15%. As land is a state matter, regulations differ in the various states. Although in most states, the bumiputera quota is set at 30%, in Johor, it is 40%, while in some suburbs such as Shah Alam in Selangor, it goes as high as 70%.

Although the general practice is that developers can apply to the state government for permission to release unsold bumiputera units after six months or upon reaching 50% of a project’s construction, the various states have imposed their own conditions for such release.

Some state governments introduced heavy monetary penalty or levy before granting the release of these unsold units. Johor, Selangor and the Kuala Lumpur City Hall came out with a levy system where an amount equivalent to the discount given to bumiputera buyers must be paid to a fund in exchange for the early release of these unsold bumiputera units. Industry players lamented this latest ruling as an enormous liability to them, especially in Johor where the bumiputera price discount is as high as 15%.

Given the need for more flexible and business-friendly environment to ride out the rough economic conditions, it will be most timely for the government to meet the request of the Real Estate and Housing Developers’ Association (Rehda) for a review of the bumiputera housing policy in the current socio-economic context.

Rehda has advocated firmer guidelines for a more consistent implementation of the bumiputera quota policy and its release mechanism. Among the proposed initiatives are to cap the bumiputera quota at 30%, have an automatic release of unsold bumiputera units after six months or upon reaching 50% of a project’s construction, whichever is faster, and to do away with the payment of any levy or penalty to any authorities as a result of the quota units not been taken up by the target group.

Having policies that are in tune with the needs of the times is certainly one of the ways to smoothen out an otherwise rough road ahead for industry players and instil confidence back in the people.

·Deputy news editor Angie Ng has faith that by coming together as one nation, Malaysians have what it takes to ride out the crisis and emerge stronger.

By The Star (by Angie Ng)