indepth

Cover Story: Increasing home ownership, building more affordable houses

BUDGET 2015 introduces more measures to increase home ownership and build more affordable housing, and announced more infrastructure projects to boost connectivity.  

The Youth Housing Scheme offers funding of up to RM500,000 for a first home over a maximum period of 35 years to married people aged between 25 and 40 with a household income of no more than RM10,000. The scheme also offers monthly financial assistance of RM200 to borrowers for the first two years to cover part of their monthly instalments, a 50% waiver on stamp duty and a 10% loan guarantee to enable borrowers to get full financing. Offered on a first-come, first-served basis, the scheme is limited to 20,000 homes.

For Cagamas Bhd’s Skim Rumah Pertamaku, the ceiling price for properties will be raised to RM500,000 and the 50% stamp duty exemption will be extended to Dec 31, 2016. The age ceiling for eligible borrowers will also be raised to 40 years from 35.

The government also plans to build more affordable homes under Perumahan Rakyat 1Malaysia (PR1MA), the National Housing Department (JPN) and Syarikat Perumahan Negara Bhd (SPNB).

PR1MA will be allocated RM1.3 billion to build 80,000 homes. The maximum household income to qualify for the scheme will be raised to RM10,000 from RM8,000, and there will be a rent-to-own scheme for those who cannot obtain bank loans.

JPN will be allocated RM644 million to build 26,000 homes under the People’s Housing Programme. SPNB will build 12,000 units of Rumah Mesra Rakyat (3-bedroom, 2-bathroom, 700 sq ft low-cost homes) and 5,000 units of Rumah Idaman Rakyat. It will also build 20,000 units of Rumah Aspirasi Rakyat on privately owned land.

Several new infrastructure projects to be introduced include the mass rapid transit (MRT) Line 2 project linking Selayang to Putrajaya, the light rail transit (LRT) 3 project linking Bandar Utama to Shah Alam and Klang, the Eastern Klang Valley Expressway (EKVE), the Sungai Besi-Ulu Klang Expressway (SUKE), the West Coast Expressway (WCE), the Damansara-Shah Alam Highway (DASH) and the 1,663km Pan Borneo Highway that will run through Sarawak (936km) and Sabah (727km).

The Edge asked industry experts for their views on the budget announcements.

Sarah Lim
Property analyst, Kenanga Investment Bank

The budget is within expectations and it is neutral. What we and the market were anticipating was a revised Developer Interest Bearing Scheme (DIBS) for homes priced below RM400,000 for first-time homebuyers. However, even if this were implemented, as highlighted in our previous sector report, we believe the impact will not be overly significant as the developers under our coverage largely have exposure to urban areas, where homes are typically priced above RM400,000.

We think that the Youth Housing Scheme is a step in the right direction. It may benefit developers such as Hua Yang Bhd and Tambun Indah Land Bhd as most of their products are typically priced below RM500,000.

The issue of raising the household income threshold has been addressed by the budget. But not many projects are currently being implemented. Land is not cheap in urban areas, which are where PR1MA homes are most needed, given the high urbanisation rates. The government is moving in the right direction but it will all come down to execution.

Previndran Singhe
CEO , Zerin Properties

The budget was as expected and is good for the country. The infrastructure improvements are fantastic. With the second MRT line, there will be a lot of benefits, especially for Putrajaya, as it will be more accessible. The upcoming LRT 3, which has been approved, will be a huge benefit for Klang.

I do, however, wish that stimulus for the property market was announced, as developers are complaining about slow sales.

However, the emphasis to further boost tourism is good as it will benefit the hotel industry.

On the Youth Housing Scheme, I think that it is a good start but the funding limit should be adjusted according to the market as prices are likely to increase.

Siva Shanker
President, Malaysian Institute of Estate Agents

I think the Youth Housing Scheme is a wonderful idea and a step in the right direction. It was on my wish list.

As for the proposed infrastructure projects, they will enable people to buy properties in locations farther away from the city centre. Some 20 years ago, the North-South Expressway opened up Seremban. Now, the new highways will open up many other areas. As the population grows, young people need to get used to the idea of living far away as commuting becomes easier and house prices in locations closer to the city increase.

However, while an infrastructure will make the area more accessible, it can increase traffic due to the poor public transport system. Perhaps allocating money to improve public transport is a better idea. That way, people who live far away would not need to drive into the city. I flew to Singapore today and got to my hotel in half an hour. I cannot imagine the same thing happening in KL.

My only concern is implementation. We are known to have great programmes but implementation seldom goes according to plan. These houses should go to people who really need them. So, the implementation needs to be done carefully.

The 20,000 units offered under the Youth Housing Scheme are just a drop in the ocean. There are more than 20,000 youths out there who need houses.

Datuk Seri FD Iskandar
President, Real Estate and Housing Developers’ Association (Rehda)

I am thankful that the government allocated funding for infrastructure in the Klang Valley as it will help open up new areas. Over in Sabah and Sarawak, The Pan Borneo Highway is a positive move as it will make rural areas more accessible.

As for the improvement of transport services, a holistic approach has to be taken, especially with the taxi and feeder bus services within the central business district.

The extension of the 50% stamp duty

exemption, the increase of purchase limit from RM400,000 to RM500,000 for first-time home owners, and the increase in the age of borrowers from 35 to 40 years are positive moves. Individuals within this age range have the capacity to pay their monthly loan instalments but it is not easy for them to come up with a 20% to 30% down payment. These measures will also encourage developers to build affordable housing, which is what the market needs.

SPNB is getting a lot of money to build homes such as Rumah Mesra Rakyat, Rumah Idaman Rakyat and Rumah Aspirasi Rakyat, meaning more houses will be built by the government. I hope the state governments will emulate the federal government.

Senator Tan Sri Abdul Rahim
Executive chairman, Rahim & Co

The budget is very comprehensive. The prime minister is very generous in giving perks to all sections of the population. I’m very happy about the affordable housing schemes and the increase in eligibility for PR1MA houses. I am also happy that the government did not increase the Real Property Gains Tax (RPGT).

On the Youth Housing Scheme, 20,000 units are definitely not enough, but it is a good start. The government is showing how serious it is about the project.

As for the announcement of infrastructure projects, it’s all-encompassing, as it includes Sabah and Sarawak. The improvement of infrastructure in both Borneo states will help developments there.

MRT Line 2 will make it easier for people to commute as well as reduce the housing problem as many people cannot afford houses that are near the city.

Kumar Tharmalingam
Chairman, Hall Chadwick Asia

The Youth Housing Scheme is laudable but like the earlier PR1MA housing scheme, there is a need to fast-track the solution. Having four agencies with different key performance indicators may delay the implementation. In fact, why set up another arm? Why not give PR1MA the right to implement with a finance business partner, structured like the Building Societies of UK that were funded by the government? I would like to see it (the implementation) more streamlined.

However, the effort shows that the government’s heart is in the right place. The devil is in the detail.

As for the infrastructure projects, I can’t wait for them to start. We need them so badly, with 600,000 vehicles being sold every year. Where the trains stations are built, property values within a 5km radius will gradually increase as connectivity is key to housing. For example, Bukit Beruntung with no connectivity has no value.

The self-assessed RPGT is similar to income tax and it is very difficult for people to cheat. I think it is a positive move and an advantage as it removes some bottlenecks, such as the use of lawyers.

As for the Pan Borneo Highway, all I can say is, finally they [the East Malaysians] have arrived in the 21st century.

This article first appeared in The Edge Malaysia Weekly, on October 13 - 19, 2014.

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