THE proposed Residential Tenancy Act (RTA) in Malaysia has not only spurred the public’s dissatisfaction, but will further dampen international investors’ interest in Malaysian properties if the bill passes, property watchers have told The Business Times.

The creation of an additional layer of bureaucracy will make the country less attractive compared to other countries in the region, said National House Buyers Association honorary secretary-general Chang Kim Loong.

The RTA, which aims to provide a legal safeguard for both landlords and tenants, was supposed to be tabled by Malaysia Housing and Local Government Ministry in March. But it has been delayed due to widespread dissatisfaction. In a Feb 23 Facebook post, Malaysia Housing and Local Government Minister Reezal Merican Naina Merican said the bill “will not be brought in a hurry” to Parliament as “several components” in the proposed bill have been “of public concern”. He did not specify which proposals these were.

But observers said that one common fear of the public is that if the proposed RTA comes into force without amendments, the government will appoint an agency as the custodian for the rental and utility deposits. The worry here is that no clear mechanism or timeline has been proposed for how such deposits would be released. If it is created, such an agency would also have the power to decide the quantum of deposits, as well as to review and cap rental increments – something which observers see as a destructive move, as property rental should be determined by market demand.

Wong Whei Meng, chief executive officer of zero-deposit property rental app creator Speedhome, said that the main concerns are about how the RTA will be enforced, and how the security deposit will be released when a tenancy contract ends. “Especially for expatriate tenants who are looking at moving or going back to their countries, it will be hard for them to plan without a clear timeline,” he added.

KGV International Property Consultants (Johor) executive director Samuel Tan said if the RTA is introduced, foreign buyers might lose interest in investing in Malaysian property for rental income, due to the additional hassle in dealing with government agencies.

“In general, foreign owners prefer a simple arrangement that minimises the authority intervention. In fact, an overly stringent RTA that micromanages the tenancy terms may have the unintended consequence of pushing many tenancies to go unregistered,” said Tan.

As for the Malaysian public, a lack of confidence in the government’s administration is the main reason for resisting, said a property consultant, who declined to be named due to the sensitivity of the topic. “We know how hard and time-consuming it is to deal with the government. And with the agency holding the security deposits, what happens if the tenants can’t get back their money or can only get it back after 6 months or a year?” the consultant added.

Siva Shankar, chief executive officer of real estate agency Rahim & Co International, argued that property rental is a transaction between landlords and tenants. Whether it is the rental amount or the increment, it should only be decided by market forces, he said.

“The landlord could ask for an exorbitant rent hike, but tenants will have the option of walking away and renting from others. The authority’s interference will complicate the situation and perhaps in many instances, cause owners to leave their units vacant, rather than get into a position that could compromise their status,” he noted.

Granted, not all the measures are bad for the market, said the National House Buyers Association’s Chang. The suggestion of setting up a quasi-judicial tribunal is a laudable move, he felt, as currently the only way to resolve landlord and tenant disputes is through a lawsuit, which is costly and time-consuming. But he added: “The problem is whether the overstretched Housing and Local Government Ministry has the manpower and resources in executing these measures in an efficient way?”

Source: https://www.businesstimes.com.sg/asean-business/governments-interference-on-property-rental-might-dent-investors-interest-in