GEORGE TOWN: The federal government has been urged to reconsider the RM500,000 property value limit for the Rent To Own (RTO) financing scheme, as it is still considered very high for many prospective buyers.
State Local Government and Housing Committee chairman Jagdeep Singh Deo said the RM500,000 price limit did not make sense, as there were several types of affordable housing in Penang which were priced below RM300,000.
He said the Penang government allowed the RTO scheme for affordable housing up to RM150,000, as it was for those who cannot get loan from banks.
“In fact, we already have a few RTO schemes such as for a RM42,000 low cost home at RM200 for 22 years.
“This is affordable. But RM500,000 for 20 years, the buyer will have to pay RM2,093 per month. That’s unaffordable to many.
“So I’m asking the federal government to reconsider the price limit,” he told reporters after a tree planting programme at The Summer Place here today.
Jagdeep added that those who could afford to buy RM500,000 properties do not need help.
“Those who need help are the ones who cannot afford RM42,000 low cost and RM72,500 low medium cost properties. It is more important to prioritise them. That is Penang's stand.”
In tabling the 2020 Budget recently, Finance Minister Lim Guan Eng said the RTO scheme applies to the purchase of first homes, with a property value of up to RM500,000.
According to him, the applicant would rent the property for up to five years, and after the first year, the tenant would have the option to purchase the house based on the price fixed at the time the tenancy agreement was signed.
Under this scheme, financing of up to RM10 billion will be provided by the financial institutions with the support from the government via a 30 per cent or RM3 billion guarantee.
On another matter, Jagdeep urged the state government to maintain its price threshold for foreigners to buy property at mainland Penang.
He said the current price threshold for foreigners to buy stratified properties in mainland Penang was RM500,000, and as such it did not make sense to raise the value to RM600,000.
“Last Monday, I discussed the matter with Local Government and Housing minister Zuraida Kamaruddin, who agreed that each state has its own characteristics. We cannot compare Penang with other states.
“If we want to reduce the current price threshold for stratified properties to RM600,000, it means the state government will have to increase the price by RM100,000 on the mainland.
“We will not change the mainland prices,” he added.
Jagdeep was referring to the 2020 Budget announcement that the property threshold for foreigners had been reduced to RM600,000 from RM1 million.
The price limit change would be in effect for one year to encourage property sale and clear the billions of ringgit worth of property overhang.
Jagdeep said for the island, if was also difficult to drop the prices from the current RM1 million for stratified property to RM600,000 as most of the existing units are RM800,000 and above.
“I suggest we drop the limit to RM800,000. Instead of one year, I suggest we limit the timeline to six months as this will help developers clear property even faster and then concentrate on building affordable housing,” he said, adding that the proposals would be discussed at the next state executive council meeting.