Tax rate cut set to buoy REIT industry


REAL estate investment trusts (REITs) received a much-needed boost in Budget 2009 as the Government seeks to make them more attractive through the reduction of the withholding tax on dividends to 10%.

Under the proposals, the tax rate for foreign institutional investors would be halved to 10% while the rate was cut from 15% to 10% for the individual Malaysian investors.

The reduction in the withholding tax is aimed at attracting more foreign investors into the domestic capital market.

OCBC Bank (M) Bhd director and chief executive officer Jeffrey Chew said that the fine-turning of the tax regime made the local REIT industry comparable to the more developed REIT markets such as Singapore.

In Singapore, the tax for foreign institutions is currently 10% and there is no tax for its citizens.

“It is expected to stimulate the interest of foreign investors and spur the current lacklustre Malaysian REIT sector,” he said.

Chew added that the measures would position REITs as a dynamic asset class to boost the equity market besides enhancing the avenue for property owners and developers to unlock asset value.

Axis Real Estate Investment Trust chief operating officer and executive director Stewart LaBrooy said the lower taxes would also attract more foreign investors to list REITs in Malaysia.

He said the local REIT industry was more attractive than Singapore’s because of the lower property prices. He also expected more local investors, especially individuals, to go into REITs due to the withholding tax reduction.

LaBrooy said he expected the Government to later lower the withholding tax for companies.

AmFirst Real Estate Investment Trust chief executive officer Lim Yoon Peng said the reduction would attract more local and foreign individual investors.

“We hope this would spur more Malaysian companies to venture into REITs,” he said.

On the Government’s proposal of a 50% stamp duty exemption on loan agreements for medium-cost houses priced up to RM250,000, Lim said any cost savings would encourage people to buy property and thus help companies to reduce their inventory.

An analyst contacted by StarBiz said that the stamp duty exemption would not have a significant impact as the reduction was too small.

Including the savings from the 50% stamp duty exemption for the instruments of transfer, total savings would be about RM2,500 or 1% for a RM250,000 property, he said.

This, he said, was hardly a main factor in consideration to buy a house.

The Government also proposed to increase the fund under the Housing Credit Guarantee Scheme to RM100mil from RM50mil now.

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