Changing the mindset
What will it take to switch the negative view of Bumi lots to positive ones?
By Viktor Chong firstname.lastname@example.org and Joseph Wong email@example.com
This has been a sore topic for property developers, buyers and investors for decades since its enactment in the 1970s under Malaysia’s New Economic Policy (NEP). To compound matters further, state authorities are given full control over land matters except for federal territories. Hence, Bumiputera quota regulations fall under the state government’s jurisdiction, which differs from state to state.
In some states, the discounts are at 15%, and the allocation can be at 60%. For example, Selangor has one of the highest allocations with 60% for low-cost commercial units, 50% for other commercial units, 50% for low-cost industrial units and 40% for other industrial units. For residential property, there is no fixed allocation as it depends on the state’s discretion.
The discount is 7% for residential property and 10% for commercial and industrial properties except for low-cost units. In contrast, the discount is pegged at 5% for Kuala Lumpur and developers are to allocate 30% of residential or commercial property to Bumiputeras.
Given that most of Malaysia’s population comprise of Malays and Bumiputeras, why has this become an issue? Home buyers want to buy a place to live in while investors want to make money off their investments. A chunk of the negative perception of Bumi units is due to the exit strategy, in that the market generally is of the contention that non-Bumi units fetch a higher price.
A matter of perception
Given that the Bumiputera buyer is already given a sizable discount, this helps offset the difference in appreciation between non Bumi lot and a Bumi one. A Bumi lot will also appreciate in value albeit not as high as the non-Bumi one but buyers and sellers must remember the discount given.
For example, a RM500,000 non-Bumi unit has seen an increased value of 20% sold at RM600,000 after five years, giving the owner a gross profit of RM100,000. Assuming a Bumi unit was sold at RM550,000 (15% appreciation), at the initial discount of 7%, the property was bought at RM465,000 still gives the Bumiputera buyer a gross profit of RM85,000.
Given that the Bumiputera buyer would have paid less interest, lower monthly instalments and a lower 10% deposit, the amount would have added up over five year, further narrowing the difference between the gross profit made by the non-Bumiputera buyer (see page 2 for more details). Moreover, in an area where the population is dominated by Bumiputeras, finding a buyer is easier.
Some of the reasons why Bumi units are less saleable relate back to the interplay between demographic factors and the Bumi quota. For areas such as Shah Alam, Ampang, Datuk Keramat and Gombak, Bumi units enjoy good performance due to the predominant Malay population.
Find out what these experts have to say about the topic:
Real Estate and Housing Developers Association Malaysia (Rehda) president Datuk Soam Heng Choon
Malaysian Institute of Professional Estate Agents and Consultants (MIPEAC) president Francis Loh Soon Park.
FIABCI Malaysian Chapter president Michael Geh.
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