Khazanah Research Institute (KRI) described Better Malaysia Foundation’s (BMF) affordable housing proposal as unrealistic, saying the superfluous scheme would only create more problems instead of fixing the country’s property market.
BMF is the corporate social responsibility unit of Berjaya Corp Bhd (BCorp).
Dr Suraya Ismail, Director at KRI, believes the proposed scheme is not feasible given challenging conditions facing the property market, reported The Malaysian Reserve.
Generally, housing projects in Malaysia follow the “sell-and-build” delivery system, in which developers take money from buyers in advance in order to build the houses for them, she said.
“Essentially, this proposed scheme takes money from the bottom 40% (B40) community in the form of intergenerational loans, therefore, the B40 pays at least two times more for the houses compared to shorter term mortgage tenures,” she told The Malaysian Reserve in an email.
Suraya added that the scheme “takes land from the state at a lower cost, ostensibly for building affordable homes”.
“This is economic opportunism of the highest order, taking both from the most impoverished group in our country and making them pay more, and taking federal or state land to support this scheme.”
BMF’s affordable housing plan includes an “innovative” financing scheme aimed at helping homebuyers by providing them with an intergenerational housing loan.
BMF wants the government to financially guarantee the housing loans extended to the B40 group.
This makes the affordable housing plan a risk-free business model for property developers, but detrimental for the homeowners as well as the government, said Suraya.
This comes as the 60-year mortgage would see homebuyers paying much more due to the accrued interest rates, she explained.
She added that the intergenerational house loan also means that children of those in the B40 group would also “more likely inherit a ‘house loan’ – though not necessarily a house”.
Suraya pointed that the building standards under BMF’s proposed scheme does not also conform with the national standards for decent homes.
In-depth studies showed that small homes, or those measuring 450 sq ft (41.8 sq m) and the like, creates tremendous emotional and mental stress for its inhabitants. There is also a higher rate of spreading infectious diseases in these small homes, especially when they are over-crowded.
“Let us be clear. Greater financialisation does not equate to either higher affordability…Rather, it creates more household indebtedness, ‘house poor’ conditions and even worse, possible foreclosures and bankruptcy of families,” said Suraya.
BMF founder Tan Sri Vincent Tan had said last month that it is possible to build affordable housing from as low as RM120,000 each within the Klang Valley for the B40 households.
The development plan includes building affordable homes with sizes ranging between 450 sq ft and 900 sq ft, and priced from RM120,000 to RM300,000 each.
“We believe this price range is achievable with government support in terms of charging lower land premiums and nominal development charges for affordable housing projects,” he said as quoted by The Malaysian Reserve.
“As key partners to this initiative, the federal and state governments’ contribution could also be to sell development land at low cost to developers for affordable housing projects, especially in urban locations close to transportation hubs, which would translate into lower purchase prices for low-income house buyers.”
He added that BMF will also propose to the government to allow financial institutions and banks to extend 100% financing for the B40 house buyers, with the housing loans having a 40-year to 60-year tenure.