PETALING JAYA (July 14): Rehda Institute, the training, research and education arm of REHDA Malaysia has proposed an interest subsidy for the B40 and M40 income earners whereby they only pay interest at a subsidised rate for the first five years of their mortgage.

This proposal was suggested to address the low financial capacity of the B40 and M40 group in its latest Affordable Housing report which was launched today. The report is a study by Rehda Institute to address the structural problems in the affordable housing development.

“From the sixth year onwards, they [the B40 and M40] will only start paying the principal at a staggered amount lower in initial years and higher in the later part of the tenure – not in equal instalments throughout the loan tenure. This will help with affordability as income grows over the years,” the report said.

It also proposed for incentives for downpayment support offering tax deduction on interests payable towards loan taken by parents to help with downpayment in the case of lower margin approvals.

Meanwhile, another structural problem raised was the unproductive use of public funds, where an average of RM2 billion per annum is spent in the federal budget to subsidise affordable housing.

The institute has also proposed for a residential real estate investment trusts (REITs) to which creates a high impact solution at low costs to the government.

“The government can provide site for social/public rental housing in suitable locations in urban centres of Kuala Lumpur / Selangor while the REITS will come in to build social /public housing at their own costs and obtain the right to rental returns from the development for 30 years at prefixed rental rates. The ownership will remain with the government and they will collect the rental from tenants based on a percentage of their median income,” the report noted.

Further research is being conducted to work out further details.

Rehda Institute also urged for reliable and up-to-date data on demand and supply to guide industry players and authorities to make informed decisions.

“A special purpose agency (SPCA) to coordinate collation, management, analysis and dissemination of market information is needed. One of the main function of SPCA would be to manage an updated and well coordinated market information system so that such information is made useful, accessible and transparent to the industry. Stakeholders such as [Bank Negara Malaysia], Department of Statistics, the National Property Information Centre (Napic) and Rehda Institute will need to develop and conduct surveys and analyse data to ensure timely release of market information,” the report noted.

Other structural issues raised in the report include fragmented and unlevel playing field, and rigid housing policies such as quotas and price control, unsuitability of location, land scarcity, cross subsidies making prices more expensive and rising development costs.