The tax exemption on rental income and the Residential Rental Act’s formulation may lessen the government’s burden in providing shelter for the rakyat, while making the rental market more orderly.
“The 50 percent tax exemption on rental income would encourage the T20 group to buy homes and rent them out, which would ease the overhang and oversupply of houses within the RM500,000 and RM1 million range. It would also benefit the M40 group, as it would provide more choices for the rental market,” said Foo Gee Jen, managing director of CBRE-WTW.
The 50 percent tax exemption is also more relevant compared to the rent-to-own (RTO) schemes.
“RTO schemes may not work because not many developers have such big capital to take on such schemes. No developer would build homes with massive capital required to earn passive income,” noted Foo.
He believes the Residential Rental Act, which will be formulated to protect landlords and tenants, would facilitate the rental market.
“Right now, there is no central registration to govern the rental market, which is very lopsided. For example, if a tenant does not pay rent or utility bills, there is not much recourse for the landlord to take action,” he said.
“I hope with this Act, there will be a central registration system for tenants where landlords can do a background search on potential tenants to check on his or her track record and whether the person was a good paymaster or not.”
As such, “bad” tenants may be blacklisted on the system, added Foo. They could also be compelled to pay their outstanding bill and rents before another landlord decides to lease out their properties to them.
The National House Buyers Association (HBA), however, feels the 50 percent tax exemption will not benefit the tenants as it is one sided.
“There was no announcement that the tenants can claim tax deduction on such rentals paid,” said National House Buyers Association (HBA) secretary-general Chang Kim Loong.
“In this regard, HBA wishes to state its strong objection to such a tax exemption as it would only encourage more speculative purchases of residential properties by property syndicates and investors club which will further drive up property prices and deprive more deserving Rakyat from owning such properties.”
Image sourced from Kinibiz.
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