We are speaking up for the rakyat – here is our wishlist for the property sector.
The tabling of Malaysia’s Budget 2019 on November 2 will arguably be one of the most highly anticipated events in the country’s history, due to it being the first under the new Pakatan Harapan government, which won the general elections last May.
Already, speculation is mounting over the budget’s possible impact on the ‘rakyat’ (the people), who are still struggling with the rising costs of living for the past decade. It is quite foreseeable that the budget will not likely have any ‘goodies’ for the rakyat, especially due to the federal government’s high levels of debt. The government is said to be mulling several moves to increase revenue, such as raising wealth taxes, estate duties, carbon taxes and sin taxes (tobacco and alcohol).
The property sector will once again be under the spotlight, with the perennial issue of housing affordability still unresolved for most average Malaysians. Prices of homes are still beyond reach of many and affordable supply remains limited.
YB Zuraida Kamaruddin, Minister of Housing and Local Government has indicated several issues that might be addressed in Budget 2019, such as; improving the delivery of government scheme homes, more lenient guidelines for housing loans, the consolidation of affordable housing agencies and tackling of unsold Bumiputra units.
What are some of the things that the rakyat would want to see addressed for the property sector in Budget 2019? Here are 7 key areas of improvement that could be on the rakyat’s wishlist:
#1 Make the Build-then-sell (BTS) system a reality
The build-then-sell (BTS) 10:90 model for the property sector has long been touted as one of the possible solutions to protect home buyers from unscrupulous developers and lower the rate of abandoned projects. Another similar demand-driven initiative is the Build to Order (BTO) concept, which has worked really well for Singapore.
In 2012, the housing minister declared that a BTS 10:90 system would be made mandatory by 2015. There were also amendments made to the Housing Development (Control and Licensing) Act 1966 for a BTS 10:90 system, which allows homebuyers to fork out only the initial 10% down payment and paying the balance after the property has been completed and delivered.
As such, the servicing of the end-financing loans do not kick in until the houses are completed with all the certifications obtained and keys with vacant possession are presented to the buyers
More than three years on, we are nowhere near implementing BTS. What went wrong?
The government should take another serious look into this matter as BTS could be one of the major cornerstones in Budget 2019 for the rakyat.
#2 Limit approvals for new shopping malls to free up land for housing projects
It is obvious that there has been a glut of shopping malls in major urban areas, like Kuala Lumpur, in the last few years. Some of the newer malls are having trouble attracting enough tenants and visitors, what more retaining a good tenant mix – drop by Evolve Concept Mall in Ara Damansara or Melawati Mall in Ampang during the weekend and you will see what I mean.
Limiting approvals for new shopping malls could kill 2 birds with one stone. The prime lands on which these malls are often built upon could be put to better use for other projects that need more priority, such as affordable housing.
Many say that prime urban land is not suitable to build affordable housing on, due to high land cost. However, with the right mix of government incentives, regulations and developers’ innovation; building affordable housing in prime areas shouldn’t mean that it can’t be mutually exclusive, or unprofitable.
#3 Lower interest rates, not prolong loan tenures
The housing ministry is also proposing the idea of providing more flexible loan packages for first-time homebuyers, including the extension of loan tenure from the current 35 years to 40 years for purchasers of affordable homes and lower interest rates for home loans.
Although the idea of extending loan tenure to 40 years sounds good on paper, many worry that the banks would build the additional cost of this into the loans, which could actually lead to more financial burden for a longer period of time for homebuyers.
The government, with the help of Bank Negara and banks, should focus on finding ways to reduce housing loans as much as possible and scrap the idea of extending loan tenures, because the latter could negate the benefits of lower interest rates.
After all, buyers want to pay lower interest rates, and settle them sooner, rather than be saddled with them for an extended period.
#4 Timely and efficient delivery of affordable homes
The new government acknowledges that there are too many housing agencies involved with affordable housing and these overlap with one another.
There are at least nine offerings in the market including 1Malaysia People’s Housing Scheme (PR1MA), Syarikat Perumahan Negara Sdn Bhd (SPNB), Federal Territories Affordable Housing (Rumawip), Rumah SelangorKu and 1Malaysia Civil Servants Housing (PPA1M). These various products with their wide range of purchaser eligibility, selling prices, types of homes and various conditions placed on purchasers are considered to be confusing for the public.
Delivery of these homes are far from spectacular – Only 1.6% of PR1MA’s initial target of one million homes has been built in the last 5 years. That is an unacceptable achievement, to put it mildly. Our new housing minister says that there are plans to form a National Affordable Housing Council (NAHC) to consolidate, oversee and streamline the delivery of these housing schemes.
Aside from consolidation, the NAHC will need to be transparent about meeting their key performance indicators (KPIs) in delivering affordable housing to the rakyat. Benchmarks have to be set for these agencies in terms of allocation and acquisition of land, delivery of units and the budget required, in order to meet these targets.
Hopefully, Budget 2019 will provide further details on how the NAHC will perform its tasks and responsibilities effectively in the long run.
It was also promised under the new government’s manifesto that the Housing Ministry will coordinate a unified and open database on unsold affordable homes – will we see action being taken in the coming budget?
#5 Enforce cost transparency to help cut down home prices
Developers have lamented that they are unable to lower prices of homes significantly, due to the high cost of construction and land acquisition.
But is that really the case?
The public has no idea because the actual costs of housing developments are not often the most transparent. Of course, different types of housing developments will have different costing – a luxury condo with extensive facilities will be much pricier than a bread and butter property. It would also depend on the location of the developments, among other factors.
For a start, it could be mandatory for developers to present a comprehensive breakdown of construction cost, to ensure that there is an ethical transparency in increasing or reducing developers’ profit margins.
Understandably, property development is a business and developers have a right to make profits so that they could continue to fund future developments. It would be unrealistic to expect developers to reveal the costing of all their projects. Nevertheless, a case could be made for costing transparency in the national interest, especially for homes that fall under the affordable housing category.
#6 Bring back tax relief for first-time buyers
Providing tax relief and rebates could be another direct and effective way to reduce the burden of home buyers during economic uncertainties.
In fact, the government did provide some tax rebates on housing loans to boost the property market a few years ago, but has since aborted that.
Could tax relief make a comeback?
Previously, buyers who signed their sales and purchase agreement between March 10, 2009 and December 31, 2010 were given a tax relief of up to RM10,000 every year for the first three years on the interest of their housing loans. The rebate was only applicable to just one unit.
However, this tax rebate was only effective up to 2013, when the policy was changed, presumably to address speculative buyers in the market. The tax relief was no longer applicable to those who purchased properties after 2010. Instead, a higher Real Property Gains Tax (RPGT) was imposed.
The government could consider reintroducing these measures and streamline them to benefit first time home buyers of a certain age and salary bracket. For example, it could really help young professionals or couples who are just starting off their careers at the lower end of the salary brackets and want to buy their dream homes. In these cases, a tax relief could be a really useful financial assistance. If implemented effectively, it could boost the market by encouraging young home buyers.
7) Solve the unsold Bumiputra units conundrum
The problem of unsold Bumiputra units has plagued the industry and exacerbated during the economic slowdown. There has been heated debate on whether the mechanisms in implementing the Bumiputra units have been effective or detrimental in delivering affordable units.
Developers claim that these unsold stocks have placed an unnecessary burden on them, adding to their operating costs. It is high time the government tackle this issue in a more effective and just manner.
To get a better picture of the situation, we need to know how dire the financial implications of the overhang from the unsold Bumiputra lots are. This could also be another reason to implement transparency in costing, as pointed out previously.
#8 Deferred loan payments in hardship cases
Paying housing loans is one of the major financial commitments for most salaried Malaysians, apart from car loans. Banks earn huge profits from these loans and are a vital part of the property ecosystem.
However, when an economic slowdown strikes – such as the one the rakyat has been experiencing for the last 4-5 years – housing loans can be a major problem. Servicing loans can be tough, especially if a homebuyer’s income is jeopardised substantially, especially for those who lose their jobs and are not be able to fulfil their obligations to the bank.
Banks can help their distressed housing loan customers in a big way when they are facing extreme difficulties. In such cases, banks could be more lenient and reschedule payments for those whose main income has suffered significantly during the downturn.
Of course, not all will qualify but the banks could offer some flexibility, for example; to customers who have been laid off and are still jobless after more than six months. This would give them some breathing space to get back on their feet.
Written by Rudi Rajamani | Edited by Reena Kaur Bhatt