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Thursday, March 17, 2011

Supply of affordable homes in the Klang Valley is scarce

The one area that is often neglected when it comes to affordable housing is supply. Yes, loans are plentiful and there is now a scheme called My First Home Scheme launched where eligible Malaysians would be able to get a full loan for homes costing between RM100,000 and RM220,000.

The problem is that fresh supply of affordable homes in the Klang Valley is scarce and with the median age of Malaysians now just over 24 years of age, it's the time when they will start to wonder about where and how to buy their new house.

The problem is that it might no longer be profitable for property companies to develop huge tracts of land into a township of affordable housing.

The issue is that for property projects in excess of 10 acres in size, developers have to provide low- to medium-cost housing at a ratio of 1:1, meaning that for every expensive house they build they must provide one unit of affordable or low-cost housing up to a maximum price of RM100,000.

As building and land costs rise, developers will be hard pressed to make a profit, if they can, on such affordable homes. Often it's done at a loss and to compensate for that, prices of houses they would sell to the market need to be bumped up or developers build a smaller number of homes in new projects to maximise profits.

Developers building on land less than 10 acres don't have to provide low-cost homes, a loophole that has been thoroughly exploited for maximum profits among developers seeking to build high-rise super expensive apartments and condominiums.

One suggestion that has been raised is that the 1:1 rule be exempt for developers who aim to build affordable homes. In this I mean not only low-cost homes but those in the RM250,000 to RM300,000 price range. That way a developer will be enticed to build homes for the middle-income family and be able to get a decent return.

The Government, or through appointed contractors, needs to get directly involved in providing the supply of such homes. One way is to utilise idle government land to build affordable homes for the middle class and lower income group.

For optimum effect, one way is to align the upcoming mass rapid transit (MRT) lines to areas where such new townships of affordable homes could be built, somewhat replicating the HDB model in Singapore.

By building mass housing schemes serviced by a MRT station nearby, it will solve a number of issues. For one, the availability of a MRT line and a feeder bus service near a purpose-built mass housing scheme would reduce the dependence on private transportation needs in the Klang Valley, whereby giving such new homeowners the luxury of keeping their vehicles at home when they go to work.

The supply of affordable home for the lower income and middle class families need to be addressed and soon, as a prolonged ambivalence towards the issue would make that group of people feel more disenfranchised over house ownership in the country.

Failing which, the situation, if left to market forces, may not be resolved.

Deputy news editor Jagdev Singh Sidhu is saddened by the events taking place in Japan and is amazed by the attitude and behaviour of the people there in times of adversity.

By The Star

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