Developers warn 6% SST on construction services could raise home prices

Monday 05 Oct 2026

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KUALA LUMPUR (June 13): A planned 6% sales and service tax (SST) on construction services could lead to higher housing prices and market slowdown, real estate developers warned on Friday.

The tax will increase the financial burden on developers already paying indirect taxes on materials and labour, potentially forcing a review of project timelines and prices, the Real Estate and Housing Developers’ Association (Rehda) said in a statement.

“We have yet to determine the exact impact, but we expect that the move will lead to a slowdown in the market, as developers make adjustments to their plans,” said its president Datuk Ho Hon Sang.

Rehda is the latest trade group to complain about the implementation of SST. The Master Builders Association Malaysia and the Federation of Malaysian Manufacturers have both warned of cost pressures and disruption to ongoing projects and businesses in their appeal for a delay.

The government plans to collect 6% service tax from July 1 on construction services for infrastructure, commercial, and industrial buildings, if the taxable value exceeds RM1.5 million annually.

However, exemptions are provided for residential buildings, public utilities related to housing, and non-reviewable contracts that will enjoy a 12-month grace period from the effective date.

Ho said the expanded SST risks destabilising the property sector, especially if the tax is applied retrospectively to existing contracts.

“Any price hike adjusted to contracts signed prior to the effective date could result in cost overruns, which leaves developers with no choice but to absorb the additional cost,” he said.

While homes and related public amenities are exempt from the SST, the association is particularly worried about serviced apartments in mixed-use projects on commercial land, which are now subject to the tax.

“Subjecting these units to SST will inevitably lead to increased housing prices, ultimately impacting homebuyers who will have to bear the brunt,” Ho said.

Rehda stressed that lower-income groups, including buyers under government programmes such as Rumah Madani, Rumah Selangorku, and Rumah Mesra Rakyat, would face greater strain from the price impact.

Further, shoplot units integrated into strata housing and infrastructure will also be taxed, compounding the overall cost increase.

“We respectfully request the government to consider postponing the implementation date, currently set for approximately two weeks from now,” Ho said, and asked for a grace period until 2026 instead.

Edited ByJason Ng

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