Rehda: Rising costs may cause developments to become unviable

Additional costs in the property sector caused by steep hikes in building materials, cost of labour and redundant policies imposed on the industry might be too punitive for development projects to become economically viable, Real Estate and Housing Developers’ Association (Rehda) Malaysia president NK Tong said.

He said that while property developers might have been able to absorb the increased costs in the past, the various challenges and impositions in recent times had led to a breach of the tolerance level on the part of developers.

“In some cases, the additional costs may be too punitive for development projects to become economically viable.

“I am sure developers would agree with me that undertaking development in Malaysia is not as straightforward as more than 50 laws highly regulate the industry,” Tong said in his speech at Rehda’s 50th-anniversary dinner last night.

He said private sector housing development in Malaysia was not limited to the mere provision of building houses but included extensive requirements such as providing infrastructure and amenities, ensuring proper maintenance and management, especially for strata schemes, prioritising safety and promoting community living.

“Hence, more often than not, developers have become the ‘target’ to pay or contribute to any new compliance imposed by the authorities or private utility companies,” he added.

Tong said the Rehda Property Industry Survey for the second half of 2022 reported more than 20 percent in the average price increase in cement, steel, aluminium and bricks - and an annual average increase of 17 percent in construction costs.

“The Department of Statistics Malaysia also recorded that the unit price index for cement increased by 9.6 percent in February 2023 compared to February 2022, with other materials likely increasing in prices dramatically during the pandemic as well,” he added.

- Bernama