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Saturday, October 23, 2010

State firms should stick with affordable housing

Under Budget 2011, the Government’s proposal to help first time home buyers and those earning less than RM3,000 will benefit those living outside the Klang Valley.

The 10% down-payment guarantee by the Government is limited to houses priced below RM220,000 while the 50% stamp duty exemption on instruments of transfer are for houses not more than RM350,000.

While the move is much lauded and applauded, there are not many landed units priced at RM350,000 and below in the Klang Valley today. Which means those who want to go for this scheme will have to buy a condominium or an apartment.

And if one wants to take advantage of the 10% downpayment, one has to buy a property that is RM220,000 and below. There are, of course, properties further away in the Klang or Shah Alam in this price range. One will be hard pressed to find something within this bracket in Petaling Jaya unless one opts for some densely populated condominium enclave.

With the number of young people migrating to the city in search for work, most of them will have to rent before they eventually buy their own homes.

About 50 years or so ago, the Selangor State Development Corp (PKNS) were building single-storey affordable housing that cost less than RM20,000 in Petaling Jaya. Much of Petaling Jaya then – and today – are leasehold land because they are state land.

Twenty-thousand ringgit may seem a paltry sum today but for folks back then, many had to pawn their jewellery and with the help of relatives, pool money together to have a roof over their heads. Young people from the lower ranks of the civil service benefited from PKNS housing. There was another developer whose mission was to provide civil service in the higher categories with more up-market properties in Damansara Heights, Kuala Lumpur.

Today, things are very different. While PKNS continues to build houses in the urban centres, they seem to be concentrating on building condominiums. A clear example is Kota Damansara, Petaling Jaya where PKNS teamed up with developers in joint-venture developments to build high-rise properties. They do build single-storey houses but these are outside city centres in locations such as Bernam Jaya and Antara Gapi. In Klang, PKNS is building some low-cost flats.

In the aftermath of the financial crisis in 1997/98, affordable housing were those capped at RM250,000 and many private developers went into this segment post crisis. There was a huge demand for them. Several years later, to get better profits, developers went on to build “lifestyles” homes where double-storey houses cost closer to RM600,000.

Because it is becoming increasingly impossible to find houses around the RM350,000 price range in the Klang Valley, perhaps PKNS can think about entering into joint ventures with private developers to build houses which may not be all that affordable.

The government agency is offering a broad spectrum, from low-cost flats in Klang to semi-detached and bungalows in Shah Alam. There is also something to be said about low-cost housing across the board. Simply because they are low cost, developers cut them rather small, at about 600 sq ft of four- or five-storey walk-ups with no management services. These projects have the potential – and some of them do – to become urban slums.

After several years, the place becomes really deplorable because there is no sinking fund and unkempt, because there is no management fees. Eventually, social problems arise. Many of these units are also rented out to foreigners and become crime-infested until the locals living there themselves decide to leave.

With the changes in the economy, global and local, which many have never seen in our life time, housing will only become more crucial in the urban centres. State agencies should consider if they need to narrow down their offering to provide for the less-well-to-do with proper and decent housing that are manageable financially and physically so that they at least maintain their value.

State economic developments corporations like the PKNS and their counterparts can form part of the government machinery to help first time house buyers. In Singapore, there is the National Housing Board to meet this aim. Which is why more than 90% of Singaporeans have their own homes. They do not need to rent. The same goes for Hong Kong. Both Singapore and Hong Kong are relatively more manageable because they are small. But we in Malaysia have various state economic development corporations and providing affordable housing is part of the game plan. So, if it is affordable housing, why go into building bungalows and semi-detached units? Stick with affordable housing.

Assistant news editor Lee Cheng thinks there is a need for state agencies to look into providing affordable housing in urban centres.

By The Star

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