KUALA LUMPUR: In the debate over housing for low-income groups, one property expert has thrown the idea of alternatives to ownership into the fray.
A recent government proposal to include a block or two of housing for low-income in housing projects begs the question of whether the low-income group is prepared to take on property ownership in the first place.
CCO & Associates (KL) Sdn Bhd executive director Chan Wai Seen said property ownership could pose significant financial challenges for the Bottom 40 (B40) income group, potentially leading to bankruptcy.
"Are the B40 group really ready to own property and to commit to the monthly instalment?"
"To really assist this group, a more practical measure needs to be put in place, such as rent to own (RTO), a trust fund from government and developers to provide a considerable subsidy to develop these affordable residences," he told Business Times.
Chan explained that while the RTO scheme has been introduced in the country for quite some time, it never caught on.
"The government was supposed to work with several institutions to roll out this scheme. Maybank's HouzKey has been rolled out."In spite of this, the overall RTO scheme was not rolled out in a big way, I think may be due to many challenges," he added.
While Chan acknowledged that the government's Madani housing units plan is doable, its implementation will depend on factors like whether the land is sufficiently large to support additional blocks.
"There will be a lot of considerations, namely if there are any height restrictions at the site, shape of the site, etc. Ideally, there should also be separate accesses to this block," he said.
The expert highlighted that the government should be flexible with planning requirements when approving developments.
This is particularly important for strategically located and limited development sites.
Chan added that for these developments to attract developers, they must be financially viable.
"In hindsight, it is good to have a separate block from the management point of view after the project has been completed," he added.
Additionally, Chan pointed out that forcing developers to develop affordable housing will likely hamper the overall property development sentiment.
"Besides, the overall development quality may also be affected by the additional subsidy for affordable housing and increasing development cost."
"The government should carefully evaluate this matter before proceeding with the implementation. These measures (Madani housing units) may only be applicable for certain sites that meet the criteria," Chan added.
When asked about the burden on developers, he said that developers have typically been using profits from other parts of a project to offset the costs of affordable housing developments.
"Notwithstanding this, the development landscapes may have changed drastically due to factors such as rising construction costs."
"This has significantly impacted the ability of the developers to develop affordable housing," he said.
Chan said the competitive market is a contributing factor, as the oversupply in certain property segments has led to property prices rising more slowly compared to development costs.
"Slow take-up of affordable units due to bureaucracy and difficulty in obtaining loans. Many targeted buyers; e.g. B40 and lower M40 are not qualified for loans."The slow take-up rates will affect the developers' cash flow," he added.