Case studies presented at the recent 7th Annual Affordable Housing Projects have been included in an article by Property Insights. Thank you for the mention!

1. FEATURE
www.propertyinsight.com.my JUNE 2016 I 27
AFFORDABLE HOUSING :
A CASE STUDY
Until now, policies have focused on managing house prices once the consumer
receives the house at the end of the production process. This includes increasing
access to finance or subsidising supply that are highly-priced
BY: NATASHA GIDEON
M
alaysia takes a common, targeted
approach when it comes to
affordable housing, where the
demographic points towards the lower
income segment of the society whom
are excluded from the housing market
system due to a lack buying power. Many
countries combine rental and ownership
schemes depending on the specific
demographic (profile and income level)
it targets. We have a population of 30.1
million, of which 41% are between 25
and 54 and with growth of mortgage as a
significant contributor to Malaysian GDP;
36% in 2015.
Amongst the affordable housing schemes
laid out by the Malaysian government
are the My First Home Scheme (2011),
Perumahan Rakyat 1 Malaysia (PR1MA)
and My Home Scheme (2014). The 1976
lending guidelines set by Bank Negara
Malaysia mandated lending to priority
sectors including affordable housing.
It was aimed at increasing the access
to credit for affordable housing. It was
also meant to provide subsidised access
to such credit. The maximum margin of

2. FEATURE
28 | JUNE 2016 www.propertyinsight.com.my
1.75% above (Base Lending Rate) BLR
and maximum profit rate of 9% were
imposed for houses costing not more than
RM100,000 in Peninsula Malaysia and
RM120,000 in Sabah and Sarawak. Other
guidelines recently introduced is the loan-
to-value (LTV) ratio of 70% for the third
house purchased; lowering of maximum
tenure; and having all banks fix their loan-
to-value ratio based on the net selling price
rather than gross selling price.
As the population grows, the demand
for affordable housing is said to grow as
well. Nora Tahir, Chief Financial Officer of
Cagamas believes the size of households
however, is getting smaller.
A report in the 7th Annual Affordable
Housing Projects Conference states there
was an average of 5.5 people per household
or 182 households for every 1,000 people.
By 2020 the forecast shows 4 people, or
250 households for every 1,000 people.
The number of households is therefore
increasing at a faster rate than the growth
of the population that pushes the demand
for affordable houses.
In another report, Dr. Suraya Ismail,
Director of Research in Khazanah
Research Institute states that in status
quo, the median price for the Malaysian
housing market exceeds the median
annual household income threshold by
three folds, making homes less affordable
for Malaysians. In addition, not all states
have affordable housing projects whereas
areas like Penang and Klang Valley are
facing a shortage.
A case study done by Khazanah in the
Philippines (8990 Holdings) demonstrates
that building houses for low-income
households can be profitable regardless
of the location. The issue needs to be
addressed by not demanding for ‘houses’
but a living territory or a habitat. The
difference is simple. If we are building
houses as a ‘product of the building
industry’, then regulations on land or the
provision of public amenities are secondary
in ensuring fitness for occupation. A
habitat on the other hand, ensures an
expansive connectivity of networks within
its node; comprising physical (power, water
and sanitation, roads), economic (urban
transport, labour markets, distribution
and retail) and social (education, health,
security, family and friends). The ability
to connect all of these networks makes a
habitat valuable.
INDIA
The Indian economy witnessed a gradual
deceleration in its economic growth
between 2008 and 2009. This led to some
MALAYSIA
INDIA
THAILAND
DUBAI
Source : MFE

3. www.propertyinsight.com.my JUNE 2016 I 29
serious funding problems for real estate
developers as traditional banking channels
became more cautious in providing
credit and consumer demand witnessed
a slump due to the uncertain economic
environment.
The key drivers for demand and
supply for affordable housing in India
were urbanisation, rising income levels,
availability of land and more importantly
financial and regulatory support. National
Housing Bank (NHB) was set up in July
9, 1988 under the National Housing Bank
Act, 1987 to operate as a principal agency
that promotes housing finance and other
support to financial institutions.
India has since introduced a few central
level schemes such as Integrated Housing
and Slum Development Programme, as
well as External Commercial Borrowing
(ECB) for affordable and low-cost housing.
ECB itself was introduced to ensure a lower
cost of borrowing for the segment
According to Monitor Inclusive Markets,
the loan market of INR 3-10 lakhs (RM20k-
RM60k) is worth almost 1.1 million crores
(over RM600 million). However, the
majority of housing loans disbursed by
Housing Finance Companies (HFCs) are to
mid-income and high-income groups when
nearly 70% of workers in urban areas come
from unorganised sector – where they get
paid daily and lack necessary documents –
causing a mismatch in the industry.
DUBAI
Dubai has seen a surge in the affordable
housing market because of the changing
needs of property buyers and Dubai
Properties Group chief executive officer
Abdullatif AlMulla assures that financial
institutions never say no to borrowers
who adhere to the mortgage rules of the
UAE Central Bank. Their definition of
affordable houses doesn’t seem to match
the definition of elsewhere, including
Malaysia, with some affordable homes in
Dubai looking like holiday villas.
The lower or mid income segment of
Dubai represents 37% of the household
population in 2015. For banks to sanction
a loan, borrowers need to earn a minimum
salary of Dh16,250 (RM 18,000) without
any other bank borrowings at all, which
obviously doesn’t match the lower income
salary bracket. Affordable houses are
ranged anywhere between RM550,000
and RM900,000 there. Experts there say
the market is not providing enough quality
units at those prices leaving, a serious gap
in demands.
Although the government has been trying
to innovative schemes like flexible payment
plans, takers are still low among the lower
income group as the loans demand a high
deposit (of up to 25%)
THAILAND
According to the latest 2010 Population
and Housing Census, 12% of Thai
households live in rental units which plays
a more important role in Greater Bangkok
(about 37% of housing). Most financial
institutions in Thailand provide loans for
construction rental apartments. Currently,
more than 8,000 landlords nationwide
have developed rental apartments using
bank development loans.
A report by Ballobh Kritayanavaj, Senior
Vice President at Government Housing
Bank in the Asia Pacific Housing Journal
explains that housing finance in Thailand
are readily available, accessible and
affordable to nearly all income groups
with low mortgage-interest rates. These
residential mortgages have been growing
steadily and the total mortgage loans stood
at Bt2 trillion (almost RM300 billion) or
about 20% of GDP in 2010, an increase by
17% compared to 2005.
Their Government Housing Bank plays
an important role in providing affordable
home loans to low and middle income
groups and there is a healthy competition
among all commercial banks in providing
home loans. Long-term low interest rate
mortgage home loans are relatively easy to
obtain and allow a broad range of urban
households to purchase houses.
The secret of Thailand’s successful
middle and low income housing delivery
has been the decades of synergies
established through the close collaboration
of agencies like the Government Housing
Bank, National Housing Authority, and
Community Organisation Development
Institute, to create a vibrant market there.
With the demand for affordable homes
rising – particularly with the softening of
the economy that impacts the property
market – the government has been looking
at ways to provide quality affordable
housing to Malaysians. The development
rate however seems to suffer a slow
progress, including the effort of reviving
abandoned housing projects and turning
them around into affordable homes.
There is still a gap in integrating public-
private partnerships to have more private
developers on board for affordable housing
project implementations.
It would take time for the government
to create a database of needs to correlate
demands based on buyers’ terrain,
locations and costs but when the system
is in place, financial institutions too, will
have to look at ways to ease the burden for
home buyers, particularly for the low and
mid-income consumers.
Agency/Ministry Affordable Housing Schemes in Malaysia Allocation
PR1MA 175,000 houses
Sold 20% below market price
Expected completion 2016: 10,000
RM1.6 bil
SPNB 10,000 units Rumah Mesra Rakyat
Subsidy RM20,000 on each unit
RM0.2 bil
PPA1M 100,000 units by 2018
Priced between RM90,000 – RM300,000
Facilitation fund up to
25% of development cost
2014 People’s Housing Programme (PPR)
22,300 apartments
9,800 terrace houses
RM0.863 bil
GLC EPF to build 800 units
Sime Darby to build 4,600 units
Not stated
Source : NAPIC 2015