Govt mulls incentives to build more affordable homes

KUALA LUMPUR: The government is mulling more incentives to encourage developers from the private sector to develop affordable homes, said Housing, Local Government and Urban Wellbeing Minister Datuk Abdul Rahman Dahlan (pic).

"Can we give developers incentives in terms of getting rid of levies on foreign manual labourers and other tax incentives? Then we can get special incentives from the finance ministry. That might be something we can cover in the next Budget 2014 [in October]," he told The Edge Financial Daily.

"If developers are willing to build more affordable housing, we can do away with some requirements such as padang and mosques, because they have informed me that upto 50% of the land is used to meet these requirements.

"So let's say there is a similar amenity within a kilometre of that development, they don't need to build another one," he said.

The ministry is also considering ways to expedite the development of affordable homes.

"For example, if developers have problems with their development plans with the local governments, we will step in and tell them ‘look, this is a special consideration, you must fast-track it'", said Abdul Rahman.

This is necessary, as the private sector is expected to deliver about half of the one million affordable homes pledged by Barisan Nasional in its election manifesto in May.

The ministry is also mulling an alternative payment scheme for affordable homes, such as in the UK, where the government helps cover part of the down payment.

"In the UK, you pay 5%, the government pays 25%, so that makes up the 30% [for a deposit], and you take up a loan of 70% to pay for your house. The government has an equity of your house. Within 10 to 15 years, it's payback time. There are many ways to skin a cat, I think," said Abdul Rahman.

He said the government loan to bridge the gap will carry a lower interest rate, which is enough to cover administrative costs, compared with a personal executive loan that has an interest rate of about 6%.

This article first appeared in The Edge Financial Daily, on August 23, 2013.

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