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Petroleum income tax

Petroleum income tax is imposed at the rate of 38% on income from petroleum operations in Malaysia. An effective petroleum income tax rate of 25% applies on income from petroleum operations in marginal fields. No other taxes are imposed on income from petroleum operations.

Local income taxes

There are no other local, state, or provincial government taxes on income in Malaysia.

Reference: Worldwide Tax Summaries Online (pwc.com)

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Under the latest amendments to the NLC, which is yet to be enforced, there is a new provision under section 90A which specifically provides for the extension of leasehold land.

It is advisable for the owner to apply for the extension of lease before the expiry of the same. If the owner does not renew the lease and the lease expires, the land shall revert to the state government. The land is then available to any other persons who wishes to apply for ownership.

For Selangor

For Selangor, the formula for calculating the premium for the extension of leasehold land can be found in the Selangor Land Rules 2003 & Selangor Quarry Rules 2003.

The two options given by the Selangor government in their Guideline issued by the Selangor Department of Land and Mines (PTG Selangor), dated June 2011, for private residential ownership scheme are as follows:

• Option 1: To pay for the full rate of premium with a 30% rebate

• Option 2: To pay a premium of RM 1,000. If the owner decides to sell the property at a later date in the future, the owner then has to pay the balance of the premium at that point in time. A Registrar Caveat will be lodged on the land to prevent the owner from disposing the property to a third party. This scheme is subject to the condition that the owner continues to use the premises as his / her main area of residence.

In Selangor, the premium for lease extension for residential property is:

F: (1/4) x (1/100) x (Market Value of land) x (lease period – years remaining on the lease) x (land area). *Leases are usually renewed for a 99-year period.

As an example, let’s say you have a bungalow land with a land size of 7,000 sq ft in Petaling Jaya with about 45 years remaining on the lease. The premium that you would have to pay shall be as follows:

(1/4) x (1/100) x (220) x (99 – 45) x (7,000) = RM207,900. After deducting the 30% rebate, it comes to RM 145,530 and this is what you would have to pay.

The above example is based on the assumption that the government has valued the land at RM220 per sq ft.

The formula for the extension of lease for commercial and industrial land in Selangor is as follows:

F: (3/4) x (1/100) x (value of the land) x (term of new lease minus the balance of the existing lease)

For Kuala Lumpur

​For Kuala Lumpur, the formula for calculating the premium for the extension of leasehold land can be found in the Federal Territory of Kuala Lumpur Land Rules 1995.

The formula for calculating the premium for the extension of lease for all categories of land use in Kuala Lumpur is as follows:

F: (1/4) x (category of land use) x (value of the land) x (1/99) x (term of new lease minus balance of the existing lease).

Renewal of Lease for Properties with Strata Titles (Non-Landed Properties)

​For the renewal of properties with strata titles such as condominiums and apartments, there is a new provision for this under the newly created section 90A(8) of the NLC, whereby the application may be made by the management corporation on the authority of an unanimous resolution, and such application shall be regarded as an application in respect of the alienated land and provisional block.

This basically means that the master title (that the condominium sits on) as well as all the strata titles of the individual units in that particular condominium must be renewed at the same time and the application shall be done by the management corporation concerned.

Reference: www.starproperty.my.

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In the first nine months of 2022 compared to the same period in 2021, industrial property transactions in Malaysia experienced a sharp rise of 57.5% in volume and 34.9% in value. This puts the industrial property sector as the best-performing sector. According to the National Property Information Centre (NAPIC), there was a transaction volume of 6,043 units of industrial properties in the first nine months of 2022 with an accumulated transaction value of RM15.2 billion, compared with the full-year transaction volume of 5,595 units and total value of RM16.9 billion in 2021. At the end of 2022, the industrial property recorded a transaction volume of 8,082 and value of RM21.16 billion. One of the significant transactions last year was the acquisition of 34 industrial facilities in i-Park @ Indahpura in the Southern Industrial and Logistics Cluster and i-Park @ Senai Airport City in Johor by AME REIT for RM557 million. Other significant deals included the sale of a 234.5-acre industrial parcel in Johor for RM289.2 million, a 140-acre industrial land in Serendah for RM304.9 million, and an 18.4-acre industrial facility in Johor for RM390 million.

Industrial Property Analysis

The Industrial Production Index (IPI) is a measures levels of production and capacity in the manufacturing, mining, electric, and gas industries, relative to a base year. It can be a helpful indicator for the performance of industrial properties. This is because the IPI can be a good indicator of the level of industrial activity in an economy. As industrial production increases, demand for industrial properties may also increase as businesses seek to expand their operations and require a bigger space. The IPI is often used as a proxy for overall economic growth, as industrial production is a key driver of economic activity. Strong IPI numbers may indicate a healthy economy, which can lead to increased demand for all types of real estate, including industrial properties. Not only that, investors in industrial properties may use the IPI as one factor in their decision-making process. When the IPI is high and industrial production is strong, investors may be more likely to invest in industrial properties, as they may see greater potential for rental income and capital appreciation. In Malaysia, compared to the same time the year before, the IPI increased by 6.9% (2021: 7.2%). The development in 2022 was backed by increases in the Manufacturing index (8.2%), Electricity index (4.5%), and Mining index (2.8%). Therefore, since the Malaysia’s IPI increase by 6.9% in 2022, we could see a positive growth in industrial properties in 2023.

Factors to look for in industrial market in 2023

Since the Covid-19 outbreak, Malaysia’s industrial property market has been the real estate sector’s shining hero. Due to the pandemic, the rapid growth of e-commerce has resulting in spike in warehouse demand, spurring an increase in investments and industrial project launches in recent years. Although there has been a high demand for storage and logistics facilities since the pandemic, the reopening of the nation’s boundaries in April of last year has had an even greater beneficial effect on the industry, as shown by the transaction data.

The e-commerce sub-sector, which has generated a demand for distribution hubs, warehousing, and logistics facilities that are strategically located close to high population areas and served by an efficient highway system to enable quick point-to-point delivery to customers, drives the industrial sector. Since the beginning of the pandemic, there has been a significant rise in the demand for online transactions although this has slowed down somewhat in 2022, which has increased demand for storage and logistics facilities. In overall, manufacturers and warehouse operators will continue to favour mature, established areas that are easily accessible and proximity to the source of labour.

The rising adoption of smart devices and the growing demand for big data analytics and Internet of Things (IoT) technologies are prompting several Data Centres investments in Malaysia. The country now has more demand for data centres due to the increase in gaming popularity and the rapid digitization of various industries, including Banking, Financial Services and Insurance (BFSI), manufacturing, IT, and logistics. Malaysia Data Centres’ market is expected to grow at a Compound Annual Growth Rate (CAGR) of 6.7%. 

Bright Spot in 2023

Over the past two years, Malaysia’s trade performance has remained strong. Malaysia’s total trade grew at 8.6 per cent in December 2022, with the amount of RM236.0 billion as compared to RM217.4 billion in the same month of preceding year. Malaysia’s total trade in 2022 recorded a new milestone to reach RM2.8 trillion and registered the fastest growth since 1994 at 27.8%. This will provide a boost to demand in industrial properties. However, any global recession could have an impact on this. An increase in demand for industrial space and properties is anticipated as FDI inflow increases, particularly in the manufacturing industry. At the end of fourth quarter of 2022, Malaysia’s position in terms of FDI grew by RM14.4 billion, hitting a record RM875.1 billion (Q3 2022: RM860.8 billion). The manufacturing industry continued to be the top beneficiary, receiving RM380.6 billion, or 43.5 percent of the total FDI. At the end of 2022, Malaysia recorded a total FDI of RM3.4 trillion. As a result of consumers getting back to their regular pre-covid routines, the business environment has improved. Not only that, now that all economic sectors are allowed to open and this will permit businesses, including manufacturers and logistics operators to resume normalized operations. In addition, international borders have opened, allowing foreigners to enter without being subjected to isolation or covid testing. As a result, this will ease and facilitate business as well as leisure travel. 

Hotspot

As of 2022, the top three locations for industrial property hotspots were Greater Kuala Lumpur, Johor, Penang and they representing for nearly 60% of the existing industrial property supply. Malaysia securing RM194 billion in authorised investments in the first nine months of 2022 with Selangor and Johor are at the top of the investment ranking, according to the Malaysian Investment Development Authority (MIDA).

In terms of Greater KL, the scarcity of land in established industrial areas such as Petaling Jaya, Subang Jaya and Puchong has encouraged investors and developers to explore alternative areas. These are mainly located in the north and south, particularly in cities like Klang and Shah Alam, which have remained as industrial property hotspots in the area because of their proximity to Port Klang and their surroundings, which include an established market with a large talent pool.

Meanwhile in Johor, Iskandar Malaysia in Johor has the potential to draw foreign investors, particularly from capital-intensive sectors with high technology investments, owing mainly to its proximity to Singapore, competitive land prices, freehold ownership and lower labour costs. Notable developments include Mercedes-Benz’s new after-sales logistics centre in Senai Airport City, Volkswagen’s regional parts distribution centre in Port of Tanjung Pelepas and the Saint-Gobain manufacturing hub.

Penang has further positioned itself as and developed into a regional electronics manufacturing centre thanks to the presence of a strong electrical and electronics (E&E) cluster, as the pandemic has accelerated the sales of raw materials. This is supported by rapid technological advancements and digitalisation which have increased demand for industrial properties in the state.

Conclusion

Given the unpredictability of the external environment, the performance of the real estate market is anticipated to increase in accordance with the moderately lower economic growth anticipated for 2023. Despite this, it is anticipated that the property sector will continue to benefit from accommodating policies, ongoing government support, well-executed plans for all measures listed in the revised Budget 2023, and the correct implementation of strategies and initiatives under RMK-12.

The post Industrial Property Updates 2023 first appeared on CBD Properties.

There were total of 3,830 transactions worth RM10.75 billion recorded in the first half of 2022 (H1 2022), which indicates an increased by 49.5% in volume and 66% in value as compared to first half of 2021 (H1 2021). Selangor continued to led the market, with 31.8% (1,219 transactions) of the overall industrial volume, followed by Johor and Perak, each with 13.8% and 9.0% market share. Terraced factory formed 31.4% of the total industrial transactions, followed by vacant plots (29.5%), and semi-detached factory (23.2%).

Industrial Market Status

Despite a little reduction in volume and value of 5.2% and 12.2% respectively (H2 2021: 1,130 overhang units worth RM1.58 billion), the industrial overhang remained minimal at 1,071 units worth RM1.39 billion. Similar to the previous point, the category of unsold under construction fell by 22.9% to 504 units from H2 2021’s 654 units. The unsold not constructed recorded 43 units, more than 22 units recorded in H2 2021.

Industrial Construction Activity 

The industrial sub-sector of the construction activities are still operating at a low tone. 118 units were completed, 265 units were started and new planned supply 118 units. There were 119,551 existing industrial units with 4,620 units in the incoming supply and 6,572 units in the planned supply at the end of June. Selangor and Johor led the existing stock and incoming supply with a combine market share of 50.2% and 54.8% in the related development stages while Melaka led planned supply with 27.1% share (1,783 units).

Price of Industrial Property 
Industrial property prices performed inconsistently but remained stable in major states. In WP Kuala Lumpur, a terraced factory at Sri Edaran Light Industrial Park increased by 19.4%. Likewise, Selangor and Pulau Pinang recorded an upward movement between 2.5% to 9.8% and 4.7% to 5.8% respectively for similar type.

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