There have been much talks amongst Malaysian real estate investment trust (REIT) players pertaining to the possible relaxation by the Malaysian Government on REIT’s rules so as to boost the industry’s profile among foreign investors and accelerate its growth.

They viewed that the relaxation of certain REIT’s rules are crucial to the development of the Malaysian REITs due to:

• Malaysian properties are still relatively cheaper than our neighbours like Singapore, Hong Kong and China where there is upside potential in asset revaluation or further capital growth and
• That the Malaysian REITs also offer more attractive yields than the Singaporean counterparts, with some offering yields as high as 8% and 9%, compared with around 5% or 6% offered by Singapore REITs,

So what’s are some of their wish lists:

1.0 Firstly, they hope that the Malaysian government would review the withholding tax in the Budget 2009. Once the withholding tax is abolished or revised downwards (comparable to Singapore, the industry will improve further. (Neighbouring Singapore is frequently viewed as the more attractive destination for investment due to its lower withholding tax for foreign investors at 10% versus the 20% applicable to

2.0 Next, the hope that the government would  allow Malaysian REITs to invest in development projects. Incidentally in Malaysia, REITs are not permitted to invest in development projects but only in completed properties, which some players feel closes the door on opportunities to gain cheaper entries, thus maximising yields. It is understood that the Securities Commission may review this, however, there is still no official word.

3.0 Last but not least, the REIT players also welcome being allowed to manage their own REITs, currently not possible under the Valuers, Appraisers and Estate Agents Act 1981 that they are bound to. Under Section 21 of the Act, only registered valuers and appraisers are allowed to manage a property on behalf of the owner for a fee, a ruling which also applies to the management of REITs. The reasons being the REIT players believed firstly they themselves have the necessary expertise to run their own REITs and that they also believed that there is presently a scarcity of valuers with sector-specific experience related to REITs.

(Source: The Edgedaily.com 25/5/08)

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