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Calls for quotas on affordable homes

KUALA LUMPUR (July 3): State governments should impose quotas for affordable housing on property developers, said Minister of Housing and Local Government Datuk Seri Chor Chee Heung in his keynote speech at the Third Annual Affordable Housing Projects conference on Monday.

Quoting statistics from a recent Household Income Survey by the Economic Planning Unit (EPU), Chor said 76% of Malaysians earn below RM5,000 per month. “Based on a credit line at 30% of net income for housing loan and at the current base lending rate of 6.6%, the maximum price of houses that this group can afford, below RM5,000 per month, is below RM300,000.

“As such, affordable housing in Malaysia can be defined as houses priced below RM300,000,” he said. Chor said in the past, quotas imposed by the state government on private developers were only on low-cost housing.

“Instead of purely low-cost housing quotas, state governments can apportion a certain percentage for developers and impose a quota on affordable housing, perhaps, not more than RM300,000 per house.

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Chor says affordable housing in Malaysia can be defined as house priced below RM300,000.

“This will make property developers happy because they won’t have to subsidise so much in their imposition of quotas for low-cost housing,” he said. Property developers view the call for a quota imposition on affordable housing by state government positively as it will meet the demand of the swelling middle income group in the country.

“Property developers would rather build affordable houses compared to low-cost houses. We can make a profit by building affordable houses, but not low-cost houses. “Plus, low-cost housing doesn’t match current market demand,” said a property developer familiar with the Malaysian property scene.

Property developers pointed out that there is an oversupply of low-cost housing presently. “Even in places outside the Klang Valley, nobody is taking up these low-cost units. Some developers had to go to the state government to apply for a waiver on the low-cost status,” said a property developer.

However, property developers said it would be difficult for an affordable housing quota to be imposed in the Klang Valley as land for development consists of pocket-sized developments. “Prices of land in the city are expensive. Furthermore, there are only small parcels of land. How will the state government be able to impose quotas when the development is only two blocks of high rise condominiums?

”This quota will be suitable for developments outside the city,” said one property developer. Chor said since 2010 the federal government has stepped up initiatives in addressing the affordable housing dilemma faced by the middle income group through programmes such as 1Malaysia People’s Housing Scheme (PR1MA).

PR1MA, a public-private partnership between property developers and the federal government, aims to build 42,000 units of affordable homes within the Klang Valley, Rawang and Seremban. For the first scheme launched in July 2011, house prices ranged from RM150,000 to RM300,000. Meanwhile, for the second scheme, houses will be priced between RM200,000 and RM400,000.

Deputy Minister in the Prime Minister’s Department, Datuk Devamany S Krishnasamy, told the press that PR1MA is a way to harmonise supply and demand. “We are harmonising demand. When we do that, the prices will settle to a level that is fair to people. If property developers make a 50% margin previously, now they will only make a 30% margin,” he added.

Acknowledging that access to housing is a basic need, Chor said the affordable housing quest would require collaborative partnership between all stakeholders to shoulder the responsibility of provide affordable housing.

“Shortage of affordable housing needs to be addressed immediately. Failing which, the burgeoning middle income group will become a ‘sandwiched group’ without proper homes leading to various social economic problems,” he added.

This article appeared on The Edge Financial Daily July 3, 2012.

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