KUALA LUMPUR – A real estate industry group has warned that the planned 6% sales and service tax (SST) on construction services from July 1 could drive up housing prices and trigger a market slowdown.
Real Estate and Housing Developers’ Association (Rehda) president Datuk Ho Hong Sang said that while the full impact of the tax remains uncertain, developers would need to revise their plans, which may lead to a cooling of the market.
“The industry already bears indirect taxes on construction-related items such as building materials and labour. The addition of SST will only increase our burden,” he said in a statement.
“To ensure fairness, we sincerely hope SST will not be applied retrospectively. Any price increase applied to contracts signed before the effective date could result in cost overruns, leaving developers with no option but to absorb the additional costs.”
Ho said Rehda had engaged with government agencies through numerous consultations before the announcement to seek clarification and highlight the potential impact on the industry.
While he acknowledged that the exemption for residential buildings and public amenities offers some relief, Ho raised concerns about developments on commercial land—such as service apartments within mixed-use projects—which will be subject to the tax.
He explained that due to land scarcity, residential units are often built as part of mixed developments. Subjecting these homes to SST would lead to higher property prices, affecting buyers directly.
Ho warned that lower-income groups could be hit hardest, especially buyers of affordable housing located on commercial land under schemes such as Rumah Madani, Rumah Selangorku, and Rumah Mesra Rakyat.
“Additionally, some local authorities require shop lots to be included in strata residential developments. SST will undoubtedly affect the owners of these units too,” he said.
“To make matters worse, infrastructure built within these projects will also be subject to SST.”
Ho urged the government to postpone the implementation, now less than two weeks away, noting that many of Rehda’s small and medium enterprise (SME) members have yet to register with the Inland Revenue Board (LHDN).
“Granting a grace period until 2026 would allow them sufficient time to prepare,” he said.
Rehda is the latest group to raise concerns about the tax. The Master Builders Association Malaysia and the Federation of Malaysian Manufacturers (FMM) have also called for a delay, citing cost pressures and potential disruption to ongoing projects.
Under the government’s plan, 6% service tax will apply to construction services for infrastructure, commercial, and industrial buildings, where the annual taxable value exceeds RM1.5 million.
Exemptions will apply to residential buildings, public utilities related to housing, and non-reviewable contracts, which will enjoy a 12-month grace period from the effective date. — June 13, 2025
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