• The upcoming revival of incentives and policy measures for the affordable housing scheme and MM2H program is predicted to significantly influence the property sector in the Budget 2024. These measures encompass three key changes: 1) a revision of the current unappealing MM2H program, 2) a remodeling of the MADANI affordable housing scheme, and 3) the introduction of a Rent to Own Scheme.

• Considering the positive sentiment surrounding pending infrastructure projects like HSR, MRT3, and the revival of the Iskandar property market, we maintain an optimistic view on the sector's long-term outlook. These projects hold the potential to create a spillover effect in the property sector.

• Nonetheless, we maintain a NEUTRAL stance on the Property sector due to the persistently challenging operating conditions in the near-term. We are wary with higher interest rate and inflationary pressure which could adversely affect consumer sentiment.

The Budget for 2024 is perceived as predominantly oriented towards supporting both individuals and businesses with a strong emphasis on opportunities highlighted by both the National Energy Transition Roadmap (NETR) and the New Industrial Master Plan 2030 (NIMP), as well as Iskandar 2.0. However, the budget is also expected to introduce new sources of taxes and implement a targeted subsidy mechanism. We are of the view that the primary focus of the 2024 Budget is to implement 'people-centric' programs designed to mitigate the impact of the rising cost of living on the Malaysian public, where in the context of property sector is the revival of incentives and policy measures especially for the affordable housing scheme. Among the expected key measures are:

Madani Affordable Housing Scheme. On June 23, 2023, Prime Minister Datuk Seri Anwar Ibrahim announced the MADANI affordable housing scheme in Kuala Lumpur. This scheme is designed to provide opportunities for individuals in the M40 and B40 income categories, as well as for young people, to own homes with prices ranging from RM150,000 to RM200,000. The scheme includes five projects, namely: Residensi Prihatin MADANI, Residensi MADANI, Residensi Sejahtera MADANI, Rumah Majlis MADANI, and Rumah Ihsan MADANI. These new MADANI affordable housing schemes represent an enhancement of the current initiatives, such as the People Housing Programme (PPR) and Rumah Mesra Rakyat Programme

Introduction of New ‘’Rent to Own Scheme’’. By the end of the 12th Malaysia Plan (12MP), Malaysia is making progress towards constructing 500,000 affordable homes through a private-public sector collaboration. Recognizing the burden of elevated housing prices and increasing rental rates on the people, the government plans to introduce the Rent to Own Scheme, aiming to enable more target groups to become homeowners. Additionally, there is potential to introduce new initiatives for managing the supply of affordable housing through the secondary market.

MM2H to be reassessed. Note that MM2H is designed to provide long-term visas for residents of countries officially recognized by Malaysia. Currently, there are three ongoing programs, and one in the pipeline known as Sabah MM2H. The three ongoing programs include the national Malaysia My Second Home (MM2H) scheme, the Premium Visa Programme (PVIP) by the federal government, and the Sarawak MM2H. Foreign individuals interested in MM2H had expressed dissatisfaction with the criteria, which previously required a fixed deposit of at least RM1mn (increased from RM300,000), liquid assets of at least RM1.5mn (previously RM500,000), and a monthly offshore income of RM40,000 (up from RM10,000).

In response to concerns that MM2H requirements had become too stringent, we anticipate that the government will review the scheme to ease the requirements.

Considering the prevailing market conditions, which pose challenges such as increasing interest rates and inflation pressure in the near term, we maintain a NEUTRAL stance on the sector. Additionally, the potential rationalization of subsidies in the future could impact both buyers and developers. Nevertheless, we hold a favorable perspective on developers who have demonstrated a strong history of generating sales and possess a reputable brand, especially with substantial land holdings in desirable locations and minimal holding costs. Maintain a BUY call on Simeprop (TP: RM0.86) and revising our call to Hold on Mahsing as the stock has now reached our valuation (TP: RM0.85).

Source: BIMB Securities Research - 2 Oct 2023