Budget 2025: Biggest ever allocation to reinvigorate economy

• To encourage homeownership, first-time homebuyers will enjoy tax reliefs up to RM7,000 for the first three years. 

KUALA LUMPUR (Oct 18): Prime Minister Anwar Ibrahim (pictured) today presented the Budget 2025 in the Dewan Rakyat. The budget, themed “MADANI Economy: Prosperous Nation, Well-being of the People”, is the largest in the country’s history, with a total allocation of RM421 billion, surpassing the previous year’s budget of RM393.8 billion.

Despite efforts to reduce the fiscal deficit, the government has maintained an expansionary stance to stimulate economic growth. The budget focuses on three key areas: revitalising the economy, implementing reforms, and improving the lives of Malaysians.

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In 2025, the government will invest RM120 billion in development projects, including RM9 billion through public-private partnerships (PFI) and RM25 billion in direct domestic investment by government-linked investment companies (GLIC).

These are the highlights you need to know:

Affordable housing 

1. People’s Residence Programme (PRR): Almost RM900 million will be allocated to implement 48 PRR and 14 Rumah Mesra Rakyat (RMR) or People-Friendly Housing projects, including two new PRR projects in Port Dickson, Negeri Sembilan and Seberang Perai Tengah, Penang. 

2. 30 PRR projects are expected to be completed by the end of 2025, benefiting nearly 17,500 new residents.

3. Up to a maximum of RM90,000 will be allocated to assist the construction of each new home under the hardcore poor housing programme (PPRT), recently rebranded to Program Perumahan Rakyat Sejahtera (PPRS) residents, fishermen and residents of New Chinese Villages.

4. The ceiling rate for house repairs under these schemes has also been increased to a maximum of RM20,000.

Malay reserve land 

1. For the first time in history, the Madani government has agreed that 50 acres of the strategic Bandar Malaysia development project will be set aside as Malay reserve land 

2. Permodalan Nasional Bhd (PNB) and Pelaburan Hartanah Bhd (PHB) will continue to enhance cooperation in developing Malay reserve lands for affordable housing projects, student accommodations and commercial developments.

Housing Credit Guarantee Scheme 

In 2024, an allocation of RM10 billion was provided to expand the Housing Credit Guarantee Scheme (SJKP), which was aimed at benefitting 40,000 borrowers in this category.

Under Budget 2025, RM12.8 billion is allocated for SJKP to benefit 57,000 first homebuyers. SJKP will also be available for homes developed on wakaf land, with a guarantee of up to RM500,000 for first-time homebuyers.

A new ‘Step Up Financing Scheme’ has also been introduced under SJKP, offering government guarantees up to RM5 billion, specifically for young individuals who wish to purchase their first homes. This scheme provides the convenience of lower loan repayments for the first five years.

Flood mitigation 

1. RM600 million is allocated to the National Disaster Management Agency (Nadma) to prepare for potential floods, including an advance allocation of RM300 million for immediate response. 

2. A matching grant of RM20 million has been made available to GLIC’s and government-linked companies (GLC)’s foundations to accelerate relief efforts for flood victims.

3. RM50 million has been allocated for cleaning and upgrading drainage systems.

4. RM10 million is allocated to conduct a Geotechnical Study of Soil Layer Structures on major roads in the Kuala Lumpur Golden Triangle.

Sejati MADANI

To date, Sejati MADANI has successfully sparked over 6,400 rural economic activities. Under Budget 2025, a total of RM1 billion is allocated for the Sejati MADANI efforts, covering:

- RM600 million to boost rural economies in villages, towns, rural villages and Orang Asli settlements
- RM200 million to expand the Kampung Angkat (adopted villages) MADANI programme in 200 villages nationwide
- RM100 million for public universities to implement Kampung Angkat MADANI, and Technical and Vocational Education and Training (TVET) institutions to provide services like house repairs and electrical wiring to communities
- RM100 million to empower People’s Housing Programme (PPR) communities across the country through various socio-economic programmes
- RM50,000 to RM100,000 to be allocated to every rural area, urban poor village, rural village, and longhouse

Tax relief for first home purchase

First home buyers will enjoy individual income tax reliefs on the interest payments for the home loans, as follows:

Individual income tax relief on the interest payment is subject to the following conditions:

- The residential home must not be used to generate any income.
- The sale and purchase agreement must be executed between Jan 1, 2025 and Dec 31, 2027.
- The amount of individual income tax relief on allowable interest payments is applicable for three consecutive years of assessment, commencing from the first year the housing loan interest is paid.
- Two or more individuals are eligible to claim the tax relief for the same residential home based on apportionment of the loan interest payment. 

Inclusive development

National development will focus on projects that benefit the people and facilities that support industrial areas based on state priorities. Among them are:

Johor:
1. The expansion of the North-South Expressway (PLUS) from four to six lanes in phase 3 from Simpang Renggam to Machap
2. The Johor Bahru-Singapore Rapid Transit System (RTS) project is expected to operate in 2027
3. The construction of a barrage and marginal water reservoirs on Sungai Sedili Besar, Kota Tinggi

Kedah:
1. The expansion of Kulim Hi-Tech Park to house semiconductor companies like Infineon
2. The construction of additional buildings at Kulim Hospital

Kelantan:
1. The construction of the Machang Water Treatment Plant
2. The extension of the runway at Sultan Ismail Petra Airport, Kota Bharu

Kuala Lumpur:
1. Developing the heritage region by restoring the Sultan Abdul Samad Building, KL Railway Station Building, and Carcosa Seri Negara by Khazanah
2. The Istana-Kiara (LIKE) Highway Project from Jalan Duta to Jalan Istana

Melaka:
1. The construction of an elevated U-turn and direct U-turn from Pulau Gadong Junction to Taman Cheng Perdana Junction, Melaka Tengah
2. The construction of the Melaka Central Market

Negeri Sembilan:
1. The upgrading of Bahau-Keratong Road, Jempol
2. The upgrading of the Kuala Sawah Regional Sewerage Treatment Plant

Pahang:
1. High-priority flood mitigation projects involving rivers in Pahang
2. The construction of the Cameron Highlands bypass by upgrading the road from McDonald’s Roundabout to Brinchang Junction

Penang:
1. The Penang LRT Project
2. The expansion of Penang International Airport
3. Batu Kawan Industrial Park 3

Perak:
1. The Kerian Integrated Green Industrial Park (KIGIP) is the first high-tech green hub in Southeast Asia, led by SD Guthrie (formerly known as Sime Darby Plantation) and Permodalan Nasional Bhd (PNB)
2. The Sungai Perak raw water channelling project for water supply to northern Perak and Penang
3. The Automotive High-Tech Valley (AHTV) in Tanjong Malim is the country’s automotive hub, driven by Proton and Geely
4. Lumut Maritime Industrial City (LuMIC) as a regional maritime industry hub

Perlis:
1. The construction of a road connecting Jalan Pesisir Pantai to Kuala Sanglang and the upgrading of Jalan Persiaran Wawasan, Kangar, from two to four lanes
2. The upgrading of the Wang Kelian Immigration, Customs, Quarantine & Security (ICQS) Complex and the construction of new blocks

Selangor:
1. Sungai Langat Flood Mitigation Plan Phase 2
2. The expansion of Port Klang towards the aspiration of becoming one of the world’s top 10 ports, including widening the road on Pulau Indah and North Klang Port

Terengganu:
1. The Sungai Tepoh and Banggol Air Lilih Flood Mitigation Plan, Kuala Nerus
2. The Cypark Solar Hybrid Power Plant, Merchang
3. The Kenyir Floating Solar Hybrid Plant and Green Hydrogen Hub

Sabah & Sarawak
1. Sabah and Sarawak will receive substantial boosts to their infrastructure development, with Sabah allocated RM6.7 billion and Sarawak receiving RM5.9 billion.
2. The special grant for Sabah and Sarawak will be doubled to RM600 million.
3. Four work packages for the second phase of the Sabah Sarawak Link-Road (SSLR) have been finalised, valued at RM7.4 billion.
4. The government will expand the projects for Tawau Airport in Sabah and Miri Airport in Sarawak, with a total cost of RM253 million.
5. A new RM1 billion cancer centre is set to be built in Sarawak, with the federal government and state government sharing the costs.

Green efforts

1. Putrajaya will install solar panels on rooftops along nearly 5km of pedestrian walkways and parking areas.

2. The Net Energy Metering (NEM) programme, which allows for rooftop solar photovoltaic (PV) system installations, has been extended until June 30, 2025.

3. The Green Technology Financing Scheme (GTFS) will continue with a RM1 billion funding allocation until 2026.

4. UEM Lestra and TNB are investing RM16 billion to upgrade transmission and distribution networks and decarbonise industrial areas.

Public-private developments

1. RM9 billion worth of public-private partnerships projects are currently being implemented, along with RM25 billion in direct domestic investments from government-linked companies.

2. Public investment for developments in 2025 will amount to RM120 billion.

3. Private investment will be Increased by RM78 billion to create 900,000 job opportunities by 2030.

4. Public interest projects using the professional development plan (PPP) approach include: Sultanah Aminah 2 Hospital in Johor; elevated highway from Juru to Sungai Dua, Penang; WISE highway from Gopeng to Kuala Kangsar, Perak; and the West Coast Expressway (WCE) priority section from Banting, Selangor to Gelang Patah, Johor.

New incentives for high-value sectors
1. Tax incentives for export expansion will be extended to integrated circuit (IC) design activities.

2. Special tax deductions will be given to private universities to develop courses in digital technology, AI, robotics, IoT, data science, FinTech, and sustainable technology.

3. Special income tax incentives are offered for 21 economic sectors in states like Perlis, Kedah, Kelantan, Terengganu, Sabah, and Sarawak, to bridge regional economic disparities.

4. To encourage sustainable practices, tax incentives like investment tax allowances or income tax exemptions will be provided for carbon capture, utilisation and storage activities.

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