Government Initiatives to Help First-Time Homebuyers in Malaysia

Finance Minister, Lim Guan Eng, has announced a number of property related initiatives as part of Budget 2019. He introduced ground-breaking reforms in the residential property sector aimed at boosting homeownership. Riding on strong economic gains, the government now wants to focus on building consumer confidence, especially when it comes to affordable housing. Thanks to these measures, financing a home has never been easier. Let’s take a look at what has changed and the new schemes launched by the Ministry of Finance.

Property Crowdfunding Scheme

The government has introduced an innovative plan to increase residential property sales. The launch of FundMyHome.com, a peer-2-peer (P2P) funding platform, is the first-of-its-kind in the residential property sector. Through this programme, the government wants to bring in more financing options to help people buy their first home.

Under the framework, first-time buyers will have to put in only 20% of the cost, and the rest will be funded by potential investors. For example, if you want to buy a house valued at RM150,000, you have to come with just RM30,000. The rest will be sourced through crowdfunding. This drastically reduces the initial seed money, making it easier to apply for a home loan.

You can obtain assistance to buy homes from any developer, including homes built under the Perbadanan PR1MA Malaysia scheme. The programme will be regulated by Securities Commission Malaysia (SC), which is also working on creating guidelines for the same. Bank Negara Malaysia has already give the plan its green signal.

RM1 Billion Fund for Low-Income Buyers

In order to help low-income homebuyers, the government has decided to set up a private sector-driven RM1 billion fund. You can get financial assistance to purchase affordable housing valued at a maximum of RM150,000. Financing will be made available through participating banks which include BSN, RHB Bank, CIMB Bank, AmBank, and Maybank. From 1 January 2019, individuals who earn RM2,300 or less per month, can obtain home financing at rates as low as 3.5% p.a.

Apart from the RM1 billion fund, the government will allocate RM25 million for first-time buyers with monthly income of up to RM5,000. Cagamas Bhd will extend leasing guarantee to buyers so that they can secure home financing relatively easily.

The government has also extended the repayment period at Public Sector Home Financing Board (LPPSA) to help current homeowners. Public sector employees will now have more time to repay their loan, with the first financing period extended to 35 years and the second to 30 years.   

Waiver on Stamp Duty

The budget also included a waiver on stamp duty of up to RM300,000. Buyers who are looking to purchase their first home valued up to RM500,000 will be exempted from paying stamp duty charges on instrument of transfer and loan agreement. Charges will be waived off for purchase and sale agreements executed between 1 January 2019 and 31 December 2020. This will bring down the cost of buying a home significantly.

For unsold properties valued between RM300,001 and RM1 million, the exemption is limited to the instrument of transfer for six months as part of the National Home Ownership Campaign. The sale or purchase must be made between 1 January 2019 and 30 June 2019.

Exemption from Real Property Gains Tax (RPGT)

RPGT is a form of tax that is charged on the gains or profit made by the sale or investment in property. It was introduced to limit speculation on property to drive up the price. As per the new reforms, housing valued at RM200,000 or less will be exempted from RPGT. The move is expected to boost affordable, low cost and low-medium cost housing in the bottom 40% of the population. Although the rate has been increased for companies, foreigners and Malaysians who sell land worth more than RM200,000, the exemption for B40 could contribute towards the stabilisation of the market.

Building Materials and Services Exempted from SST

In yet another move to reduce the cost of buying property, especially residential, the government has waived off SST on basic materials and construction services. The exemption applies to cement, sand, iron, bricks, and other materials. Finance Minister believes that the tax exemption will help bring down the cost of construction, which will in return make property ownership affordable.

Earlier, building services and materials were subjected to 6% GST. Subjecting construction to tax is was cited as one of the reasons for bringing about inflation in the construction sector, and driving up the price of property.

Overall, the steps taken by the government are aimed at improving house ownership percentage in Malaysia. As soon as all the reforms are implemented, it will be a good time to think about buying a new home. With assistance being offered to almost all sections of the society, it will also make it easier to get home loans from banks.

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