State governments have been urged to cut their reliance on land and development charges as their main source of income as this contributes to higher property prices.
Speaking at Rehda Institute’s Budget Commentary 2017, Dr Suraya Ismail, director of research at Khazanah Research Institute, said state governments should look for other sources of income instead of relying heavily on revenue on land and related matters.
In concurring, Real Estate and Housing Developers’ Association Malaysia (Rehda) president Datuk Seri FD Iskandar noted that the rising conversion premiums is not sustainable in boosting state revenue.
“If over 80 percent of your revenue is from land and development-related matters, it is not going to be sustainable. Selangor, being a state right in the middle of everything, you have the port and airport, you have to be innovative and create more jobs, high-paying jobs. When you have high-paying jobs, you create a niche for yourself,” he said.
“All states must find their own niche, where to find more revenue. When you keep on charging developers, there is a threshold. Once the developer cannot take it, they will pass it on to consumers.”
Iskandar revealed that land cost is the highest for developers, with construction cost following close behind along with labour cost and compliance cost.
Selangor Mentri Besar Datuk Seri Azmin Ali on Monday unveiled a forecast of RM2.55 billion revenue for the state in 2017, of which 81.7 percent will be accounted for by land and development-related matters.
State governments should have the will to alter their revenue structure, said Rehda vice-president Datuk Wan Hashimi Albakri W.A.A Jaffri.
“Putting collaboration aside, the state must be more innovative in generating revenue,” he added.
While some property developers try to negotiate for lower charges, developers currently have no choice since the charges are imposed by state governments, said Wan Hashimi.
Mangalesri Chandrasekaran, Editor at PropertyGuru, edited this story. To contact her about this or other stories email mangales@propertyguru.com.my
