Property
Out with the old, in with the new
V Sanjugtha 
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The creation of a unified body to oversee the various agencies mandated to provide homes that fit the rakyat’s pocket will now come to fruition.

With demand for cheaper homes unmet, the industry waits with bated breath for clues to reforms that will help bring down home prices to meet the rakyat’s needs.

It is believed the amalgamation of the many fragmented units tasked to provide affordable homes will see the creation of either an agency directly under the Ministry of Housing and Local Government (MHLG) or the National Housing Department (NHD).

A source close to the deal explains to FocusM that there will be less bureaucracy with the new entity as it will absorb the various fragmented organisations and their programmes.

Alternatively, there is a high possibility that each organisation will continue to function as separate entities with the ministry setting administrative and operational directions to streamline activities.

“Frankly, this method may not be as effective. Results will be faster and more efficient if the existing organisations are merged to create a single unit under the ministry,” he observes.

The core structure of the merged entity is yet to be finalised, but its key function will be to streamline the execution of affordable homes to the rakyat, improve efficiency in the planning, monitoring and implementation process and monitor the disbursement of homes to deserving buyers.

Other benefits include a higher level of construction activities and reduced development cost due to economies of scale.

It is understood that all existing projects will be carried out till completion. However, terms and conditions of new projects will be reviewed and decided upon by the new governing body; if they are deemed to be undesirable, the projects will be terminated.

The merger will encompass organisations such as the federal government’s 1Malaysia People’s Housing Project (PR1MA) which is under the purview of the Prime Minister’s Office, Private Affordable Ownership Housing Scheme (MyHome) under the housing ministry, 1Malaysia Civil Servants Housing Programme (PPA1M) under the National Housing Department, People’s Housing Project (PPR), Syarikat Perumahan Negara Bhd (SPNB) that provides the Rumah Mesra Rakyat 1Malaysia and Rumah Idaman Rakyat under the Finance Ministry, and RumahWIP under the Federal Territories Ministry.

There are other government entities providing affordable homes as well, including the Rural and Regional Development Ministry, Armed Forces Fund Board (LTAT), Agriculture and Agro-based Industry Ministry and Federal Land Development Authority (Felda).

The source also reveals another issue on the cards: the creation of a unified landbank registry which will enable better distribution of projects among the separate entities and avoid overlaps.

This registry is expected to include the existing landbank of the current affordable homes providers as well as new government land alienated for the purpose.

The landbank registry will allow for a central monitoring system of all land acquired and how to carry out projects. This will aid in reducing the government’s operating costs and monitor the locations of future affordable home projects.

However, an ambiguous and challenging aspect to this would be the mechanics of merging the landbank from all the organisations as they are under various ministries and departments.

 

Conundrum

Market observers are keen to see how three key areas that plague the affordable housing industry will be addressed: location/land, costs and financing.

In the past, location has always been a point of contention as many of the projects are in far-off areas with poor connectivity resulting in high transportation costs.

Another is that prime land allocated for affordable housing projects have been reassigned to include commercial and lifestyle development, reducing the number of homes available to the public.

It is hoped that with all affordable home providers under one body, there will be clearer direction and better control over the location of the projects.

 

Financing

The challenge of securing financing is another issue. Despite being successful applicants for affordable home projects, there are reports of inability in securing financing for the purchase.

The government recently announced a new mechanism to facilitate the bank loan application process chiefly to give young Malaysians as well as those in the bottom 40% (B40) and middle 40% (M40) income group a leg-up in owning their first property.

Housing and Local Government Minister Zuraida Kamaruddin says credit ratings for loan applicants will also take into consideration the second or third income earner in the household.

Cost is another point of contention, with many developers crying foul over rising compliance costs and the long time taken for approval.

With all affordable home projects coming directly under the housing ministry, faster approval especially for affordable homes can be expected.

However, the source informs that a reduction in compliance costs is not on the cards as it is beyond the scope of the federal government since land is a state matter. He says only a reduction in licensing costs could be a possibility, as implemented in the PPA1M home projects, where it is a flat rate of RM200,000.

Other compliance costs, such as for land conversion, utilities compliance, development charges, planning fee, service improvement fund and consumption tax fall under the purview of the local authorities and state governments, hence the federal government is unable to impose mandatory discounts or rebates.

On a positive note, he believes that a unified body stands a better chance of negotiating favourable terms for lower compliance costs.

The source also reveals that streamlining requirements at units of about 800 sq ft comprising three bedrooms and two bathrooms are expected.

 

Database and registry

Other key areas that the rakyat are looking forward to are the creation of a unified and open database on unsold affordable homes and the coordination of rent-to-own scheme for the B40 and M40 groups.

Chang Kim Loong, secretary-general of the National House Buyers Association (HBA), lauds the move to create a unified body for affordable home providers.

He feels the creation of an integrated housing database is also crucial and hopes the unification of the affordable home project providers will see the creation of a centralied database that will allow potential buyers quick and easy access to details of homes available.

“In the past five decades, scores of low-cost housing project schemes and funding plans had been introduced in Malaysia.

“Information on low-cost projects, those under construction or planned by the various low-cost housing providers, state economic agencies, federal bodies and funding schemes, should be made available to the public in a database,” he says.

Chang adds that this will allow individuals to learn about the availability of affordable housing in their communities, the pricing structure and the financing options available.

He also hopes the new agenda for affordable housing will do away with racial profiling in the award of homes and instead focus on eligibility.

He is also optimistic of better efficiency in the registry of applicants, calling for more transparency in selection methods and adherence to the criteria stipulated.

There have been reports in the past of affordable home buyers who have more than one home in their name and those who exceed the minimum income bracket.

A central issue in addressing the affordable homes challenge in Malaysia is the lack of an integrated database that captures the supply and demand of housing.

The scarcity of information such as household income, characteristics and preferences has resulted in a large number of unsold residential properties, even affordable houses, in various states including Johor, Selangor and Kedah.

The database ideally should comprise household income, characteristics and preferences such as built-up size and location in the market.

Routine surveys should also be conducted to gather household-level data. This could provide guidance on the supply to the market and should be tapped into by the government and developers to make informed decisions on future developments.

 

Educate home buyers

Chang hopes the government will also look into providing education programmes for homebuyers to ensure they understand the buying process and avoid pitfalls in purchases.

Drawing parallels with the creation of the Credit Counselling and Debt Management Agency, he believes the low to medium income households need to be educated on homeownership responsibility.

He points out that there is a need to ensure all potential first-time low to medium cost homebuyers attend a homeownership education programme before they search for a home or sign a sales and purchase contract. This is to ensure they understand the home buying process and avoid making mistakes that could drain their finances. Areas covered should include financial literacy, evaluating household needs, house buying process, loan process and maintaining the home purchase to ensure they remain homeowners.

“Homeownership education can be in the form of manuals to be handed out, advice and information given out by telephone, workshops or ‘face-to-face’ counselling,” Chang elaborates.

These services should ideally be provided before a potential buyer signs a purchase contract. Counselling should be provided to help households maintain their homes or to manage their finances. FocusM



This article first appeared in Focus Malaysia Issue 287.