MALAYSIA’s property sector must be one of the most regulated sectors in the country.
Developers often lament the fact that there are more than 50 laws, by-laws, regulations and guidelines governing the housing industry alone.
Some of these rules, they say, are prescriptive and facilitative in nature. Some are necessary to protect house-buyers against rogue developers.
But some tend to be too stringent, cumbersome or even outmoded, leading to a myriad of compliance issues and adding to the cost of doing business.
As land is a state matter, each state has a different housing policy or rules that may not be keeping up with the times.
These uninformed and sometimes onerous policies have a far-reaching impact, especially on the Federal Government’s determination to provide more affordable and low-cost homes for the people.
One of the main challenges in providing low-cost housing is the mismatch between supply and demand, as Prime Minister Datuk Seri Najib Razak pointed out at the Real Estate and Housing Developers’ Association Malaysia (Rehda) gathering last week.
“I urge all states to revamp outdated policies and come up with an inclusive and transparent approach for an equal distribution system, so that low-cost housing is available where it is needed,” he said.
Housing is a basic necessity. As the population and incomes grow, so does the demand for better housing.
The challenges for the government and the developers are two fold. From the demand side, the growing affordability gap and from the supply side, the inadequate supply of completed units of certain types of housing and the mismatch in pricing and location have translated into over-demand in some locations and for specific types of housing.
These issues are compounded by the fact that each state adopts different policies when it comes to the statutory approvals for housing projects, and the provision of low-cost and Bumiputera housing quotas.
These are:
NON-UNIFORMITY of state low-cost housing quotas and locations, with some projects required to set aside up to 30 per cent for low-cost homes, leading to the high number of unsold units in less favourable locations;
HIGH land conversion premium, for example in Selangor, and different conversion rates among the various states; and,
NON-UNIFORMITY in the quantum of quotas for Bumiputera buyers and discounts for Bumiputera buyers plus the release mechanism for unsold Bumiputera units.
The people need homes, but in the right locations and at the right price.
But the state governments, especially those in opposition hands,
are being widely perceived as being less helpful, especially in meeting
Putrajaya’s annual targets for
“social housing”.
In the case of Selangor, the land conversion premium costs have gone up by 300 per cent since the Pakatan government came to office in 2008.
In addition, it has introduced what it called “infrastructure contribution cost” of three per cent, over and above the normal “development charges” of three per cent.
These and other charges have pushed up the overall “compliance costs” from 10 per cent of the total project cost to 25 per cent currently. The remaining 75 per cent are land and construction costs.
State agencies, such as the Selangor State Development Corporation (PKNS), have also shied away from building “social housing” in favour of more high-end and medium- to high-end homes, leaving the task of developing low-cost houses to private developers.
These developers have no choice but to cross-subsidise the cost of building low-cost homes (which may not be fully taken up) via the sale of premium units.
Current subsidies can go as high as RM40,000 per unit. This is clearly not sustainable and has an economic impact, they said.
As a way out, state governments may consider waiving the low-cost quota ruling. Instead, private developers can contribute to a centrally administered fund for state low-cost housing in lieu of building physical units.
In some states, local councils even require developers to set aside almost 45 per cent of the total built-up areas for common facilities, such as elevated car parks, a move that inevitably adds to the costs.
In the 2015 Budget announcement, the government said it planned to build 80,000 units of 1Malaysia People’s Housing (PR1MA) homes and 63,000 under other federal housing programmes.
Housing the nation is a huge task that requires the support of all stakeholders, from state governments to local authorities and banks.
State governments can help by freeing up more land for housing, expediting the approval process and upgrading dilapidated public housing.
Maybe it is time to give more bite
to the so-called national housing
policy and further empower the ministry overseeing housing and local government.