No major price cut on construction materials post SST

By Fara Aisyah

The Sales and Services Tax (SST) exemption for building materials may see construction cost dropping by about 2%, but developers are expected to use any savings to add value to new developments.

Paramount Corp Bhd group CEO and director Jeffrey Chew Sun Teong (picture) said although the prices for building materials such as cement, sand, bricks and iron would be exempted from the SST, property prices would not reduce significantly.

“It will definitely reduce the development cost between 1% and 2%, but the price may not drop significantly. The 1% to 2% of the cost will probably be passed back to the buyers in terms of price structures or by providing more fittings and better quality products,” he told reporters at the company’s first half of 2018 (1H18) financial results briefing for fund managers and analysts in Petaling Jaya last week.

The SST will be implemented early next month as a replacement for the Goods and Services Tax (GST). Previously, the GST imposed levy on various construction materials, pushing house prices higher.

Developers had previously claimed that construction materials accounted for a small portion as other development costs had pushed prices higher. Chew said many factors contributed to the house prices.

“It also depends on the demand and supply. If the properties launched are at a good location, then definitely the price will not come down.

“But for properties that are not selling well, there is a possibility developers might actually give more discounts,” he said.

Meanwhile, Paramount’s net profit more than doubled for its second quarter ended June 30, 2018 (2Q18), to RM42.3 million from RM18.08 million posted a year ago, mainly driven by gains realised from the disposal of a 9.4-acre (3.81ha) piece of industrial land in Kota Damansara.

The land disposal had contributed revenue and a profit before tax of RM92.1 million and RM43.2 million respectively.

During the quarter, the company’s revenue also increased 46.7% to RM278.37 million from RM189.72 million recorded in 2Q17.

Paramount’s unbilled sales as at June 30 soared to RM866 million against RM534 million in the same period last year.

Chew said the number would contribute positively to the company’s performance in the future.

Paramount is also on track to meet its RM1 billion sales target this year, as it has achieved RM598 million of sales in 1H18.

During the first six months, Paramount launched RM708 million worth of new projects. The company is targeting to launch RM1.2 billion worth of projects this year.

Riding on the strong take-up rate of recent launches including Keranji, Greenwoods in Sepang; Atwater in Petaling Jaya and Suasana Tower 1 in Batu Kawan, Penang, Paramount will launch Suasana Tower 2, Phase 2 of Keranji, as well as commercial development in Atwater by 2H18.

Chew said the company is constantly looking at opportunities to dispose of some parts of its land.

“We completed the disposal of Lot 7 and 9 in Kota Damansara. We’re looking at disposing of a couple pieces of land that we have. One of them is a 10-acre land in Cyberjaya which we think would be better if we sell it off,” he said, adding that other plots include those in Klang and Bukit Mertajam.

“We are also on the lookout to acquire land. People have been approaching us, but we have to be careful because we don’t want to increase our leverage and take more borrowings. But if it’s on a joint-venture basis with a good structure, then we may consider,” he added.

Article from The Malaysian Reserve