KUALA LUMPUR: Malaysia has watered down an unpopular property gains tax, saying the 5.0 percent levy will only be imposed on properties sold within five years of purchase, reports said Thursday.

Prime Minister Najib Razak reportedly said the decision was made following appeals from industry groups, and that the government would forgo tax revenue amounting to 200 million ringgit (59 million dollars) a year.

"The government decided on the policy as it wants to see stronger growth in the property sector next year," he was quoted as saying by The Edge financial daily.

"We are willing to forgo a substantial amount of revenue so that the sector can expand and grow," he added.

The tax, imposed on financial gains made on the sale of a property, was announced by Najib, who is also the finance minister, in the 2010 budget in October.

It is being reintroduced after being removed in 2007, in a move aimed at broadening Malaysia's tax base to finance various development projects.