Compliance costs and property prices

Wednesday, April 21, 2010



Compliance costs and property prices


In property development, there are various costs involved, but one of the largest costs is compliance costs. According to Real Estate and Housing Developers’ Association (REHDA) vice president and chairman of REHDA’s Kedah/Perlis branch Datuk Ricque Liew, a survey is being carried out and compliance costs might account for approximately 30% of the purchase price of properties.


REHDA vice president Datuk Ricque Liew

What are compliance costs?
Compliance costs refer to the cost of doing business while complying with regulations. The property industry is saddled with compliance costs such as capital contribution to utilities companies, regulatory controls, subsidising low cost units and the bumiputera quota.

Liew said, “In the last three to four years, (I have) been attending lots of things on behalf of REHDA. And thankfully the people in EPU (Economic Planning Unit) is listening and reviewing whether (it is) fair to impose all these (costs) on this particular industry. The problem with public perception is that (the) developer makes tonnes of money.”

Inequitable cost loading
Currently, infrastructure costs, such as piping for water and cabling for electricity, are borne by developers. Upon completion, developers then handover the responsibilities to the respective utilities companies. Liew said, “It is the cost of compliance that is loading to the house’s price.”

Liew opined that all service providers should contribute towards their respective capital infrastructure costs or capital expenditure (capex), as opposed to property developers installing the infrastructure. He also mentioned that the utilities companies can then recover costs through tariffs.

Low cost housing
In order to ensure that the private sector construct low cost housing, the Malaysian government, through the local authority, imposes 30% quota provision of low cost housing in every residential development.

Liew suggested a review as to whether the need for the quota on low cost housing is still necessary as Malaysia’s economy has grown and the low cost policy was set in the late ‘60s or early ‘70s. He also said that the government must recognise that things are different today, and that he has been engaging various industries on the notion of the Malaysian government resuming the responsibility of providing subsidised housing for its rakyat.

“Now, the government, under EPU, is looking at one-room, two-room, and three-room apartments. (I am) happy to note that they are going in the right direction. Like Singapore’s HDB, they monitor. (For example) young and married couples only need 1-room apartment. Once (they) need to upgrade and move into a 2-room unit, (they can) return to (the) housing development board to redistribute the (1-room) unit for people with similar needs,” Liew elaborated on Singapore’s approach.

Liew sums it up
“Compliance costs (are) much higher (in Malaysia) compared to other countries. Singapore does not have these types of compliance costs. The Singapore Government through HDB takes care of social housing,” he explained.

Liew summed it up, “Most immediate, (we should) remove (the) need for developers to provide low cost housing. Two, cap the (bumiputera) discount to certain products below, for example, RM350,000. Utilities companies can recover costs based on consumption, meaning to increase tariff.”

REHDA Property Forum 2010
Datuk Ricque Liew, an interesting and animated speaker who supports the GST (Goods and Services Tax) and is an advocate for non-subsidised petrol, water and electricity, will be sharing more of his views on “Coping with Increased Compliance Costs” at the 2-day REHDA Property Leader Forum 2010. The forum will take place on 22 – 23 April (Thursday and Friday).

For inquiries or registration, call 03-7803 2978, email syahiidah@rehdainstitute.com / ong_huitse@rehdainstitute.com, or visit www.rehdainstitute.com

By The Star (by Sherry Koh)