*Maybe* this is #1 reason why Penang affordable housing initiative will fail

Haven’t you heard?

Penang property developers are now facing a glut swelling in the affordable segment, which has about RM7bil worth of mid-range properties planned to date.

These units, meant for the first-time home ownership market with prices ranging between RM200,000 and RM400,000, will enter the property market over the next three to four years.

The state government’s income eligibility limit of RM8,000 for a RM300,000 unit and RM10,000 for a RM400,000 unit is slowing the take-up rate of affordable properties, according to the Real Estate & Housing Developers’ Association (Rehda Penang).

Why la?

  • Salaries not too high but exceed the RM8,000 and RM10,000 gross household income limit.
  • Already own a property, or cannot get bank loan approval

housing-affordability

Source: The Star

“So what happens if the eligible buyers endorsed by the state government fail to qualify for the necessary bank loans?”

“There will be an oversupply of affordable properties, resulting in such projects being abandoned or not taking off at all,” Rehda Penang chairman Datuk Jerry Chan told StarBiz.

Of the 34,608 units, some 20,950 are planned for the island, of which 830 ares to be built by the state government, and the remainder by the private sector, involving 12 developers.

Ideal Property Group executive chairman said due to the rejection rate of bank loans hovering at 30% to 40%, Ideal finds it hard to sell the 4,840 units under the One Foresta and I-Santorini affordable schemes, priced between RM300,000 and RM400,000.

“Over 90% of the buyers are in the late 20s or early 30s who faces highest bank loan rejection rate. Their gross household income, if they are married, hovers around RM6,000.”

“If they take up a loan for 35 years, they have to service an interest payment of RM1,700 per month.”

“With other commitments such as car loans, their DSR (Debt Servicing Ratio) becomes high and that explains the rejection by banks.

For low cost units, it does seem that there is another problem to the equation – low credit worthiness of the borrower.

Good to have double standard in this case?

Come on, it is a chicken and egg story. We know that without bank loan (or probably wealthy FAMA support), almost all people who do qualify for affordable housing from the first filtering (meeting the basic requirements set by Penang gov  – ‘you must be a voter la’, etc) would not qualify for second filtering (banks’ DSR requirement and CCRIS report).

We laud Penang gov effort, and we understand that given the benefit of doubt, people are good although they might miss a few overdue payments here and there, hence affecting their CCRIS report. I root for you guys.

So  perhaps another standard of qualifying borrowers’ eligibility is needed, and definitely make sense for Penang affordable housing qualifier. Else the affordable housing initiative will go to waste.

Kisah Benar – a Penang affordable housing qualifier insider story

This one is like adding oil to fire

This is what he told me, lets call him Gan. Gan in his late 20’s, single and working in one of the MNCs in Bayan Lepas.

Gan got the offer to sign the loan for affordable housing, but he didn’t.

He applied for Ramah Pavilion by the way.

List of Penang affordable housing

He went to developer office and asked about the specifications and then discovered the even RM 400k unit are really really bare and without the basic renovations. No tiles, no toilet bowls, etc.

mortgage-affordability

That means cement floors for you. Maybe no doors or even basic paint job as well? (Have to ask Gan again)

Long story short, he told me the developer sales person bundled it together with a renovation package. Because how can you move in to a house nowadays with cement floor, right or not? Otherwise, without the bundled renovation package, can you expect an affordable housing qualifier to fork out RM 100k for the renovation work after OC?

So Gan analyzed and realized that, plus the renovation package, the total cost is similar to a normal unit sold by the developer.  Same – same, say – RM 600k. For 600k, if he buy the normal developer unit,  he can choose which unit, whereas for affordable housing unit, need to ballot some more. If you get ground floor, lot number 4, mai sure jia lat already. Or in Cantonese, diu lo.

diu lei meme

He then dropped the offer he on his affordable housing unit. And he’s not the only one. He confessed that his peers also did the same.

So you see la, how to really make Penang affordable housing achieve its true objectives?

This Post Has 2 Comments

  1. Affordable housing should be in the range of RM300K and below else it should not be called affordable.

    Don’t overspend on your house as over the years you will also need to spend on maintenance not to mention quit rent, assessment, fire insurance, etc. Keep it as simple and as low cost as possible. You will need more money in your twilight years for food, medical, utilities, etc.

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