The sales and service tax (SST) is emerging as a major concern for property developers, with more than 70% planning to raise property prices by 3% to 5% due to higher costs, according to a survey by the Real Estate and Housing Developers’ Association (Rehda) Malaysia.

The survey, which covered 187 developers, showed that 62% expect the SST to significantly increase project costs and disrupt business operations. About 70% anticipate construction costs will rise by at least 3%, prompting 73% of respondents to consider price hikes.

Rehda president Datuk Ho Hon Sang said the association is working with the government to refine SST rules, stressing the need for clearer guidelines for the construction and property sectors. He noted that measures such as avoiding double taxation and offering tax incentives for key materials and eco-friendly products would help ease the burden.

Developers are also calling for input tax credits or faster refunds to improve cash flow, simplified SST rates including tiered options, and enhanced digital systems to facilitate smoother dealings with Customs and relevant authorities.

Highlighting the complexity of the tax, Ho explained that while residential properties are exempt, commercial properties are subject to SST, creating confusion in mixed developments. “Materials are generally exempt, but human labour and machinery rentals — which make up a significant portion of our cost inputs — are taxed. It’s very cumbersome for developers to itemise each component. That’s why we are proposing a simplified approach, such as a flat 3% SST,” he said.

Beyond tax reforms, Rehda is also pushing for the revival of the Home Ownership Campaign (HOC), which previously offered stamp duty exemptions. Ho said past campaigns recorded strong take-up rates and believes a reintroduction could boost market confidence and encourage buying activity.