MyHome grant to boost medium-low-cost segment, says housing minister

THE EDGE WEEKLY ISSUE#1002

THE WEEK OF FEBRUARY 17 – 23, 2014

By: LAM JIAN WYN

The proposed annual RM300 million MyHome grant is to encourage developers to build medium-low-cost homes but sell them at low-cost prices to eligible buyers, says Minister of Urban Wellbeing, Housing and Local Government (UWHLG) Datuk Abdul Rahman Dahlan.

“We want to encourage more developers to go into mudium-low-cost segment.  They get some margin from this segment, but there aren’t enough of them building these homes.  So we want to incentivise it, so that more people build these homes and everyone will buy them,” he tells The Edge.

“It also solves the problem of these buyers finding the money to pay a down payment and reducing the cost for developers,” he adds.

Abdul Rahman explains that this move will encourage developers to sell low-medium-cost homes at the price of low-cost homes, or build low-cost homes of a better quality.

“What we are proposing is an improvement over the lowest common denominator, which is low-cost homes.  So let’s say you are a developer and you want to start your low-cost project this year and plan to sell each home at RM70,000 instead of RM40,000 …… that subsidy gives you some breathing room,” he says.

He stresses that this low-cost programme will apply to private developers with project over 10 acres, whereby low-cost homes will have to make up as much as 20% of the project.

According to (PM Najib) earlier this week, up to RM30,000 will be granted to 10,000 eligible buyers of low-cost homes developed by the private sector.

According to the Ministry of (UWHLG)’s policy and planning division, (KL)’s low-cost homes were priced at up to RM42,000 while new launches are priced up to RM63,000.  Meanwhile, medium-low-cost homes are priced from RM42,001 to RM150,000, with new launches priced from RM63,001 to RM100,000.  Low-cost homes in Selangor are priced at under RM42,000.

To qualify for the MyHome subsidy, interested developers must first register their projects under the housing ministry, which then evaluates them to determine if they are eligible.  After that, buyers must register with the ministry to be able to buy these homes.  Potential buyers must earn below RM3,000 per month, not own ay properties, and be economically-disadvantaged.  Homebuyers are not allowed to sell their units for 10 years.  “We have not figured out a buyback mechanism for owners who wish to sell their units before the 10 years is up, but I will bring it up in the next National Housing Council (NHC) meeting.”

For now, the RM300 million will sit in a trust fund.  “The (PM) is committed to giving my ministry RM300 million a year, and I am committed to managing the funds well.  I think this is the best way to get low-cost housing to the public because if we do it through the PPR (Program Perumahan Rakyat or People’s Housing Programme), the cost is huge.  So, instead of paying RM100,000 per unit, I am only paying up to RM30,000 per unit.”

While Real Estaes and Housing Developers Association (Rehda) president Datuk Seri Michael Yam aluds it as a step in the right direction, he says the grant will only help “narrow losses” incurred from low-cost projects.

“The cost of developing low-cost homes, excluding land cost, is already at least RM100 psf.  It these units are a minimum of 800 sf, that means the construction cost alone is at least RM80,000.  If you add land and infrastructure cost, it will go up much further,” he tells The Edge.

He adds that it should come from a wider tax base as housing is a social issue.  “The subsidy comes from the other taxpayers (who are buying free market properties) … they should be asking, why am I taxed again to help another brother when it should be general taxation like social welfare?  You should have a wider tax base as housing is a social issue.”

He also notes that in the meantime, government should use the funds more effectively.  “Why doesn’t the government, as a temporary measure, give 30,000 first-time homebuyers a grant of RM10,000 to stimulate the market?  It will have an immediate impact, as opposed to almost two years later (when the qualified low-cost projects take off).”

While the council had considered disbursing the RM300 million directly to eligible first-time homebuyers, Abdul Rahman says it may be unfair to those who had bought their homes earlier. E