KUALA LUMPUR: The real estate sector can progress, but it is hampered by the high cost of doing business which includes rising building material prices and compliance costs.
"These last two years property developers have been facing the pandemic. Even though now we are in the endemic phase, we are still faced with a lot of challenges, especially in terms of building materials and compliance costs," said Glomac Bhd group managing director and chief executive officer Datuk Seri FD Iskandar Mansor.
He said that based on the recent Rehda Property Industry Survey 2H2022 by Rehda Malaysia, the cost of doing business, depending on the states, had gone up by an average of 13 per cent to 17 per cent.
"You have compliance costs, and you have development costs. Today, if developers can make 17 per cent to 18 per cent, we will be quite happy, however, it has gone down by more than half. If you talk about compliance cost, in the last 30 years, it has gone up easily by threefold to fourfold. It used to cost 4-5 per cent of the total GDV (gross development value), but today it is 18-20 per cent," he said.
FD Iskandar was invited to speak at the 2023 Malaysian Housing and Property Summit, titled "Reimagining Development in the Post-Pandemic Era," here today.
He said based on feedback from property developers, they were concerned about the land and the facilities that they had to surrender within their respective developments.
"When you buy a piece of land for 100 acres, at that time you can develop 60 per cent of it. Then around 2010, it went down to 50 per cent. Today, when you ask property developers, their net saleable area is below 45 per cent because they have to surrender land to build schools, community centre, places of worship, clinics, and hospitals. These are all costs.
"Before this, we were asked to surrender the land. Now, we are supposed to build these schools, places of worship, and facilities such as community centre.
"These are all costs for developers. As much as we would like to see progression, every year there are so many toll gates being put onto developers to fulfill the social needs which are supposed to be the government's responsibility. We are not going to run away from our responsibilities but there must be a limit," he said.
FD Iskandar said reviving the House Ownership Campaign (HOC), not only for new houses but also for secondary properties, would benefit the economy and the real estate sector.
He also urged that the government allow greater plot ratios for new projects, provide incentives to encourage developers to build green structures, and make Malaysia the EV or wellness centres for Southeast Asia to attract foreign direct investment.
"I don't think there were many things given to the property industry in Budget 2023. I don't think there was any catalyst to make the real estate industry suddenly become the flavour of the month. Again you cannot blame the government with RM1.5 trillion in debt, and RM46 billion to service interest per annum.
"There are other non-financial ways that the government can ensure the property industry is on a better footing such as reintroducing the HOC. This is very important. Banks, on the other hand, should consider giving better financing and margins to developers and homebuyers," FD Iskandar said.