By Sharen Kaur - Published in NST Property, April 28, 2021
Tan Sri Vincent Tan Chee Yioun, Berjaya Group founder and non-executive chairman says it is possible to build affordable homes from as low as RM120,000 each in the Klang Valley for low-income Malaysians, namely the B40 (bottom 40 per cent or poor) households.
The affordable homes can also be developed in urban locations close to transportation hubs to make them attractive but the Federal and State governments' must assist by way of selling development land at a low cost to developers for them to undertake the projects.
"Low land cost would translate into lower purchase prices for low-income house buyers," he said.
Tan plans to develop affordable apartments with sizes of 450 sq ft, 600 sq ft, 750 sq ft and 900 sq ft, selling from RM120,000 to RM300,000 each.
The billionaire philanthropist plans to do this via his Better Malaysia Foundation (BMF), formerly known as the Vincent Tan Foundation.
BMF recently launched a new social enterprise programme with one goal - to assist the government to address the homeownership aspirations of the B40 group.
The foundation, together with Berjaya Land Berhad, the property arm of Berjaya Group has designed a 900 sq ft show apartment with five bedrooms and four bathrooms specifically for this initiative.
Tan said having more bedrooms in a single housing unit will comfortably accommodate B40 families with more family members, providing enough space for their individual needs.
There is also a show unit of 900 sq ft with dual keys so that spare rooms may be rented out to generate additional income for the household, he said.
Tan believes affordable housing can realistically be priced from RM120,000 to RM300,000 for an apartment ranging from 450 sq ft to 900 sq ft.
He said based on the median house price of RM295,000 in the second quarter of 2020 published by the National Property Information Centre (NAPIC) and median household income of RM5,873, the housing price range that is affordable to those with such income level is RM211,000 and below.
"At this price range, most houses are deemed to be unaffordable to the average Malaysian buyer. We believe this price range of RM120,000 to RM300,000 is achievable with government support in terms of charging lower land premiums and nominal development charges for affordable housing projects," Tan said.
"Owning your own home is a basic need of everyone. It means that all Malaysians share the responsibility of taking care of the less privileged members of our society and maintaining the nation's harmony so that everyone can live happily. We believe this social enterprise will facilitate the construction of properties with a low monthly cost of ownership, carefully designed for families to grow and prosper," Tan said.
Tan further said that banks and financial institutions should also play their part by providing loans with 100 per cent financing to B40 house buyers.
According to him, many developers are reluctant to build affordable homes because many lower-income buyers are unable to obtain home loans.
"As such, the developers will end up with cash flow problem when a significant proportion of the properties remain unsold as development costs still need to be paid regardless of the level of sales being made. If the Government were to guarantee 100 per cent financed loans by the banks for the low-income and B40 group, the supply of affordable housing could be increased exponentially as developers themselves would be keen to build more affordable homes to meet the demand since there would be a large market of B40 buyers with the available financing to purchase their properties," he said.
Tan said the majority of the B40 group will not be able to buy a home without some form of financial assistance.
"We understand that the loan applications of 60 per cent of buyers of affordable homes are rejected by banks and financial institutions due to age or poor credit scores. Many first-time buyers from the B40 group are not able to pay the usual down-payment on a home purchase. A hundred per cent of financing by lenders would resolve this issue.
"According to our research, several banks are already offering 100 per cent financing loans to house buyers with minimum income of between RM2,000 and RM3,000 per month. The government's support for this initiative will give added confidence to the banking community to lend to the B40 category of house buyers," Tan said.
Tan said housing loans should also be "two-generation" loans with terms of between 40 and 60 years where loan repayments can be extended over two generations to ensure that monthly repayment instalments are affordable and manageable and there is still sufficient disposable income left to provide the household with a decent standard of living.
For a better understanding of the quantum of monthly instalment payments for loans of differing amounts and tenors, let's say for a 100 per cent financed, 60-year, RM300,000 loan to purchase a 900 sq ft unit costing RM300,000, the monthly repayment is the only RM899, which is relatively manageable for a B40 house buyer, he said.
Tan said based on a recent survey by BFM of 1,700 employees (within the B40 group) of a private business organisation, it was ascertained that they are paying an average rental of RM900 per month for housing in the Klang Valley.
These are employees having a combined household income of less than RM5,000 per month and the survey's focus was on the amount of rent they are paying for the rental of a room or a house.
"From here we can see that the RM900 rental paid each month can cover the monthly loan repayments of RM899 had the employee been able to obtain a 100 per cent financed, 60-year loan of RM300,000. The key takeaway from this is that the monthly rentals can be converted into monthly loan repayments and a B40 person can then buy his own home. It is imperative that housing loans to the B40 group must therefore be 100 per cent financed, of at least 40 to 60 years duration so that monthly repayments are affordable and two-generational such that age and duration of the borrower's earning capacity will not be an impediment to loan approval," Tan said.
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