Do affordable homes have to be ‘living in a shoebox’?
Sometime in 2010, when I took a bold step of leaving lifestyle journalism for property writing, I was assigned to write a story on affordable housing. At that point in time, seven years ago, people were at the brink of worry as affordable houses were beginning to increase in price, not in tandem with earnings. Decent affordable homes that were only below RM200,000 were at this point being sold at RM250,000 to RM300,000.
Today, seven years later, whenever I see the words affordable homes attached to a new property launch, I smirk in disbelieve because if you read between the fine lines, you will realise that there is a catch to it.
Either, you would need to live in the outskirts (far far away from city centre with minimal transportation infrastructure planned), where you could get a home for about RM300,000 or have to settle for a home close to town with built-ups ranging between 400sq ft and 700sq ft at RM500,000.
RM500,000 (the benchmark for affordable housing announced by the government) is HALF A MILLION RINGGIT! Indirectly, what is being said is a property worth half a million ringgit is affordable?
Let’s do the math together here. If you were to purchase a house for RM500,000 on the dot, you are looking at a 10 percent down payment of RM50,000 (doable). You would probably need another RM50,000 for decent renovation works (also doable). Here’s where it gets tricky. You would need to apply for a loan for the remaining RM450,000. Applying for the loan is one thing, but obtaining the loan is another. For a RM450,000 loan, by rule of thumb, you need one third of your household income to be free to service the monthly loan repayment. Hence, for a RM450,000 loan, you would need to pay the bank back approximately RM2,500 per month for a loan period of 38 years.
Going back to the rule of thumb of one third, in order to qualify for the loan, you would need a monthly household income of at least RM7,500.
My question is, RM7,500 is the salary of a senior manager in this day and age. Hence are we trying to say that affordable housing is only applicable to senior managers?
No, some would argue, its ‘household income’ not ‘individual income’. I understand that, but even if you take a standard couple – husband and wife for instance who are renting a house. Husband works as a marketing manager drawing a salary of RM3,500 and wife works as an admin executive with a take home of RM3,000. They still don’t qualify for this ‘new’ affordable housing loan because their household income is only RM6,500.
Where is the affordability in this circumstance?
Affordable housing should and must be true to its cause. It should be in the benchmark of between RM200,000 to RM300,000. This makes more sense.
“So how can this be achieved with the phenomenal land prices in Malaysia”, a developer asked me. Well, personally, I have two solutions, though I know for a fact none would be adopted any time soon.
Solution 1
A developer must have some social conscience. Out of five projects launched, have one dedicated truly to affordable housing. I don’t mean stinge on quality or space, I mean actually take a less profit margin for this project. If you make 80 percent profit margin for four projects, can’t you afford to take a hit of only 60 percent profit margin for one?
Imagine the scenario if every developer who is launching five projects in a year adopts this mentality. There would be at least three to five new genuine affordable projects being launched on a yearly basis.
Solution 2
If the federal government were sincere about affordable housing, they should sell land to developers (following a very strict genuine affordable housing guideline) at a lower cost. This way, developers can maintain their profit margin, the government would come out looking more genuine and buyers will be happy too.
Personally, I doubt either one of the above two solutions will be adopted anytime soon, hence why I feel that genuine affordable housing is in a blur.
This article was prepared or accomplished by Gunaprasath Bupalan in his personal capacity. The opinions expressed in this article are the author’s own and do not reflect the view of any association, municipal, authority or governmental bodies.
Please send your views on this topic or other areas that you would like to discuss to Gunaprasath Bupalan – gunaprasath.terravalue@gmail.com or call in to TRAXX FM (90.3 FM) at 03 22824746 / 03 22825491 on Fridays between 8:15am and 8:45am to discuss the topic of the day with Gunaprasath during the Property on TRAXX show.
