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BMF’s affordable housing plan may cause more problems in market

Property News/ 18 May 2021 No comments

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Khazanah Research Institute (KRI) director Dr Suraya Ismail is her opinion that the affordable housing proposal by the Better Malaysia Foundation (BMF), a corporate social responsibility division of Berjaya Corp Bhd (BCorp), is deemed to be unrealistic and not achievable in current challenging property market conditions.

She said such superfluous schemes will not “fix” the property market, and in fact, it will only create more problems.

The country’s housing projects generally follow the “sell-and-build” delivery system, where property developers take the purchasers’ money in advance to build houses for them.

“Essentially, this proposed scheme takes money from the bottom 40% (B40) community in the form of intergenerational loans, therefore, the B40 pays at least two times more for the houses compared to shorter term mortgage tenures.

“Additionally, the scheme also takes land from the state at a lower cost, ostensibly for building affordable homes.

“This is economic opportunism of the highest order, taking both from the most impoverished group in our country and making them pay more, and taking federal or state land to support this scheme,” she said in an email reply to The Malaysian Reserve yesterday.

Under the affordable housing plan, the BMF proposed an “innovative” financing scheme to assist homebuyers in the form of an intergenerational house loan.

The scheme also warrants the government to financially guarantee the B40 loans, in the event of foreclosures.

Commenting on this, Suraya said it is a risk-free business model for developers, but detrimental to both homeowners and the government.

She emphasised the 60-year mortgage is detrimental to all homebuyers because they will end up paying so much more due to the effective interest rates accrued.

“In essence, intergenerational house loan for the B40 just means that children in this category will be more likely to inherit a ‘house loan’ — though not necessarily a house,” she said.

Suraya added that the building standards under the BMF scheme also falls short of the national standards for decent homes.

She noted the new standard for “affordable housing”, as recommended by the Construction Industry Development Board (CIDB), should be the minimum standard for all housing.

She added that in-depth studies have shown “small” houses (450 sq ft [41.8 sq m], micro-housing and the like) creates tremendous mental and emotional stress for inhabitants, as well as a higher rate of spread of infectious diseases especially in over-crowded situations.

“Let us be clear. Greater financialisation does not equate to either higher affordability.

“Rather, it creates more household indebtedness, ‘house poor’ conditions and even worse, possible foreclosures and bankruptcy of families,” she stressed.

Last month, BMF founder Tan Sri Vincent Tan stated it is possible to build affordable homes from as low as RM120,000 each in the Klang Valley for low-income Malaysians, namely the B40 households.

In a statement, he noted that the development plan includes affordable apartments with sizes of 450 sq ft, 600 sq ft, 750 sq ft and 900 sq ft, selling from the price range of RM120,000 to RM300,000 each.

“We believe this price range is achievable with government support in terms of charging lower land premiums and nominal development charges for affordable housing projects.

“As key partners to this initiative, the federal and state governments’ contribution could also be to sell development land at low cost to developers for affordable housing projects, especially in urban locations close to transportation hubs, which would translate into lower purchase prices for low-income house buyers,” he added.

He also said the BMF will propose to the government to allow banks and financial institutions to provide 100% financing to B40 house buyers with two-generation home loans of between 40 and 60 years duration, in order to make loan repayments more affordable and manageable.

More recently, Tan said he had already submitted the affordable housing proposal to the government earlier this month and the government is currently studying the proposal.

Read more: The Malaysian Reserve

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Slimhaus Affordable @ Balik Pulau

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A proposed affordable landed housing project by Slimhaus Technology Sdn. Bhd. at Balik Pulau. Located on a 7.2 acres land along Jalan Pantai Acheh, about 10 minutes drive from Balik Pulau town centre. It is only 1km away from Sierra Pinang gated housing scheme, only a mere minutes’ drive to SK Sungai Pinang and SJK(C) Sin Min.

This project will see the development of 199 units of 3-storey terrace houses with IBS technology. Slimhaus has plans to build 40 units (1,500sq ft) and 100 units (800sq ft) for the first phase and the remainder 55 units for the second phase. The ground-breaking ceremony is expected to be held at the end of this year or beginning of next year and the whole project would take eight months to complete.

The three-storey terrace houses would be gated and freehold, with an indicative price of RM250,000 (800 sq.ft.) and RM395,000 (1,500 sq.ft).

The project is currently in its planning stage and more details will be available upon official launch.

READ MORE ABOUT AFFORDABLE HOUSING:

Project Name : (to be confirmed)
Location : Balik Pulau
Property Type : Affordable
Land Tenure: Freehold
Built-up Area: 
800 sq.ft. and 1,500 sq.ft.
Total Units :
 199
Indicative Price: RM250,000 (800 sq.ft.), RM395,000 (1,500 sq.ft.)
Developer :
Slimhaus Technology Sdn. Bhd.

Register your interest here, and the developer will contact you for further action.

This information will be forwarded to the developer (Slimhaus Technology) for further action. We will also keep you updated on the project and future development.

*By submitting this Form, you hereby agree to our PDPA Consent Clause.
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DISCLAIMER: This article is solely based on research done using publicly available data. This is not an advertisement. Any claim, statistic, quote or other representation about a project or service should be verified with the developer, provider or party in question.

SITE PROGRESS: Valencia Residence (May 2021)

Property News/ 16 May 2021 No comments

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About Valencia Residence

Affordable yet luxuriously comfortable, Valencia Residence nestled within a friendly neighborhood with a myriad of cultures and ethnicities. It is conveniently located with an abundance of nearby amenities which include international schools, hospital, golf course, and malls. With just a short stroll, you will discover a scenic spot that offers endless play and relaxation along the stretch of sandy beach at Teluk Bayu.

Find out more about Valencia Residence

Register your interest here

*By submitting this Form, you hereby agree to our PDPA Consent Clause.
(These information will be forwared to the developer)

Prominent property consultant Michael Geh passes away of Covid-19 complications

Mike GehMalaysian property veteran Michael Geh (pictured), president of Fiabci East Asia Multi National Chapter and Raine & Horne International Zaki + Partners Sdn Bhd senior partner, passed away at the Penang General Hospital today.

The 57-year-old immediate past president of Fiabci (International Real Estate Federation) Malaysian Chapter has been actively involved in the local and international property consulting scene over the past 25 years.

According to one of his close friends, Geh was tested positive for Covid-19 and was admitted to the hospital a few days ago.

The unfortunate news has shocked the local property industry. “We are extremely saddened with grief at the tragic news that Michael Geh has left us. We will miss him dearly as we mourn the loss of a good leader who had contributed enormously to the growth of the Fiabci Chapter in Malaysia for the past two decades,” Fiabci Malaysia president Datuk Koe Peng Kang said.

He said Geh was a very amiable person whom the industry players called not just a friend, but a buddy.

The Real Estate and Housing Developers’ Association (Rehda) Malaysia president Datuk Soam Heng Choon was shocked to hear the bad news – he had a short chat with Geh just last week before he was admitted to the hospital.

“The real estate industry lost a great professional leader today. A man who is always approachable and ever willing to share his thoughts and provide valuable insights about the property sector. A jovial person who will be greatly missed. Rest in Peace Mike,” he said.

Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) president Michael Kong, who knew Geh for more then ten years and has been working closely with him the past five years, described Geh as a jovial, fun loving and a highly respected person.

Penang chief minister Chow Kon Yeow said he was saddened by the loss of Geh and said the latter had contributed immensely to the state.

Penang state exco Jagdeep Singh Deo expressed his shock over Geh’s passing and said he had known Geh from when he became the state housing development committee chairman.

“I knew him professionally and we were always available to talk, always with a smile and he was very frank about the property sector,” he said.

Geh’s funeral will be held only for his family members at the Batu Gantung Crematorium tomorrow afternoon.

Source: EdgeProp.my

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How guaranteed are guaranteed rental return (GRR) schemes?

Property News/ 15 May 2021 1 comment

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by Datuk Chan Kim Loong

GRR schemes sound very attractive, investors need to know they are not as simple as they seem. In fact, they should be approached with as much caution as advertisements for fast weight loss pills, get-rich-quick ventures or striking the lottery.

Call them what you like – leasebacks, buy-to-let, cash back, own-for-free – they are all marketing names of the GRR scheme that developers have come up with to woo investors on yet-to-be-built properties.

Basically, developers would promise to pay buyers rentals ranging from 8% to 12% per annum, or a proportion of the purchase price for a certain period of time.

This kind of marketing, which has become increasingly common, sounds enticing to investors who do not want the trouble of managing their own investments. They buy the property, and they get the rental returns thrown in.

However, the buyer has no way of knowing whether the property is going to achieve the promise in the open market. The developer may not be able to get the guaranteed rent or the property may not be let out at all during the guaranteed period.

Moreover, terms and conditions in GRR agreements are not regulated by law. As such, inexperienced investors may not understand that the fine prints are often written in the guarantors’ favour. An example of such clauses is:

Provided always and it is hereby agreed between the contracting parties hereto that the Developer reserves its right to terminate the GRR agreement for any reason whatsoever by giving TWO (2) MONTHS written notice to the Purchaser wherein such a case the Developer’s obligation to pay the guaranteed return to the Purchaser shall cease from the date of such termination. Such notice is deemed to have been received within three (3) days from the date of the letter.

Pitfalls

Generally, GRRs are best for laidback investors. Some people value the “simplicity” of the deal. However, there are issues that buyers have to be aware of and comfortable with before entering into such agreements.

A typical mortgage lasts 20 years. If you had guaranteed rentals for just three years, what would happen in the next 17 years? You would probably be left to sink or swim on your own.

Developers will show a typical table of returns that show a surplus income, but potential buyers have to take into account the cost of maintaining the property, including taxes, mortgage payments and all other fees related to acquiring a property.

Under most GRR schemes, you will also be required to buy a furniture and fittings package and commit yourself to the management charges and sinking fund of the building, on top of the regulatory quit rent and assessment tax. These will often take a substantial bite out of any rental money left each month.

GRR schemes specifically target investors rather than owner-occupiers, so when the term of the scheme ends, you may see 500 apartment units all going to the rental market at once. Imagine how many people would be chasing tenants then compared to how many prospective tenants there would be. Amidst the high competition, landlords would have to reduce rents to attract takers. Consequently, the market value of the properties would go down rather than up.

If you decided to sell, you would also be limited to mainly investor buyers, not to mention the competition you would face from developers offering higher rental returns with new developments.

Overpriced

When supply is more than demand, developers always look for ways to avoid reducing prices, and GRR is one of them. However, it will create a false economy in the long run if buyers end up overpaying for the properties based on the promise of attractive secure returns.

A guarantee is only as good as the company which underwrites it. Even if the GRR seems reasonable and is offered with honourable intentions, investors need to be sure that the developer would be able to sustain the returns if the rental or sale market were to take a turn for the worse.

If developers were to default on payments due to buyers, these buyers would likely default on their respective loan repayments, thereby setting off a cycle with dire consequences.

The rental market is volatile, depending on current competition and market conditions. People investing in these schemes are not just buying properties that they hope will increase in value over time, but also using “other people’s” money (from rentals) to pay for the purchase. The reality, though, is the market is cyclical, and it is subject to the laws of supply and demand as in any other sector of the economy.

Hence, before buying into a GRR scheme, investors should consider carefully the local market and competition, such as through doing a simple survey of the area. If market prices were lower than the proposed rent, incentives and discounts being offered by the developers, think twice, because then a rent decline after the end of the guarantee would be likely. You don’t want to end up with caveat emptor rental guarantees that guarantee nothing but heartaches.

No guarantee

Anyone who has any real estate experience knows there is no such thing as guaranteed rentals. Real estate, as with any other type of investments, has its ups and downs. There are times when you cannot find tenants. Any developer, investor club or any person who says that he or she is able to predict the future is bluffing.

Our economy goes through cyclical changes that respond to economic and other happenings in, as well as, outside our country. Projected monetary returns that cannot be guaranteed (or self-guaranteed) are doubtful in nature.

Had it been so profitable, don’t you think the developers, their shareholders and related companies would have snapped them up before making them available to the market? Why don’t they keep the units for themselves?

Should they be offered, guaranteed returns should be accompanied by documentary proof of a trust account – nothing more, nothing less.

Datuk Chang Kim Loong is the Hon. Secretary-General of the National House Buyers Association (HBA). 
HBA can be contacted at:
Email: info@hba.og.my
Website: www.hba.org.my 
Tel: +6012 334 5676

Source: EdgeProp.my

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