Groups: We need more to reduce prices of homes

PETALING JAYA: Property and construction groups want the full tax-exempt list for building materials to be revealed for them to assess its impact on construction costs.

They said more incentives were needed to bring down the price of houses.

Master Builders Association Malaysia (MBAM) president Foo Chek Lee said cost savings for construction projects could only be determined with a full list of Sales and Service Tax (SST)-exempted building materials.

“Bricks, cement, sand and iron are confirmed to be exempted from SST, but these make up only about 20-30% of construction materials needed.

“But the savings may only add up to about 1.5 to 2% of the total costs,” he said when contacted yesterday.

On Sunday, Finance Minister Lim Guan Eng said basic materials such as bricks, cement, sand and other construction materials, along with construction services would not be charged SST.

Chek Lee said it was not clear if other materials such as structural steel, roofing materials, piping and electrical components would be exempted from the tax.

One way to bring down the costs of construction was to scrap taxation of heavy-lifting equipment in line with the government’s policy to promote Industrialised Building System (IBS), he suggested.

The IBS approach is where components for a building are prefabricated off-site to be fitted later together on-site.

“For example, a 130-tonne crane can cost up to at least RM2.1mil.

“We hope tax exemption for such equipment can be given so that new cranes can be bought in line with IBS requirements,” Chek Lee said, adding that most industry players used second-hand cranes, as new ones were too expensive.

Association of Valuers, Property Managers, Estate Agents, and Property Consultants in the Private Sector (PePS) past president Foo Gee Jen said although SST exemption would bring down the cost for property developers, other building methods must be looked into as well.

“Total construction services and building materials make up about 50% to 65% of overall costs, he said.

He said other costs included land (15%-25%), compliance costs (1015%), and marketing, management and finance costs (7.5-12%).

Gee Jen said it remained to be seen if SST exemption would lead to lower housing prices, as developers must reflect the lower construction costs in their price.

“One way to bring down prices of property is to encourage IBS or Building Information Modelling (BIM) processes in the industry,” he said.

The BIM process is where digital information models are used throughout the construction project’s lifecycle.

He said local developers could be hindered from adopting such methods as they would require extensive capital expenditure and large manufacturing facilities.

“The government would need to offer more tax incentives to jump start this,” he said.