Housing conundrum for the young and developers

Jayaselan

Issues concern loans, pricing, profit margins and the social element

THE youth of today are a different breed of people than the past, says National Housing Department director-general Jayaselan K. Navaratnam (pic).

“They want to buy a car, not a house. I tell the girls, find a man who wants to buy a house, not a car.

They also want a certain lifestyle. They can sacrifice that lifestyle for something else, if they want to,” says Jayaselan.

And among those who do opt for a “dream home”, often that house turns out to be what they want, and not what they need.

Had they opted for what they “need”, the price and mortgage they finally end up paying for may be less daunting. Many of them want high financing at 90% or more, which leads to high monthly mortgages. Not only do they have problems paying, but they are also not financially savvy, says Jayaselan during a question-and-answer session at the two-day Affordable Housing Seminar 2018 recently.

High interest rates add to the challenge.

“There is a difference between purchasing power and cash flow. When I buy from Lazada online, for example, I am trying to stretch my ringgit. But when it comes to buying a house, we don’t look at stretching the ringgit. We look at convenience,” says Jayaselan.

On the other side of the equation, developers face all sorts of challenges with land cost, land conversion charges, development charges and various fees they must pay to the local authorities before they can start work on the land.

For them, time is money and there is a long gestation period of two years before they can get their development order, compared to a few months in Indonesia, says Jayaselan. All these factors, coupled with the lack of a single entity in housing, contribute to our lack of a comprehensive plan for public housing.

“We do not maximise the land available for public housing. On top of this, we have an overhang of completed but unsold units,” he says.

The government wants to establish a single entity under which housing matters come together.

Jayaselan says it is not something that can be done overnight. The ministry has been working on the plan for 18 months.

Things will be done in phases.

Already, six agencies will come under the Housing Ministry. Among them are the 1Malaysia People’s Housing Scheme (PR1MA), Rumah Mampu Milik Wilayah Persekutuan (RumaWIP), 1Malaysia Civil Servants Housing Programme (PPA1M), the Urban Development Authority (UDA) and Syarikat Perumahan Negara Bhd which have four agencies and a sixth.

“We are taking them lock, stock and barrel, so there are no staff cuts. These are civil servants but there must be agreements with the original ‘parents’,” Jayaselan says.

“If they are contract staff, then we will see if we need them or not. There are three types of staff,” he says.

Pensionable staff will not be removed, he says.

Because housing development involves large investments, developers sometimes go into joint ventures. The information is available but there may be loopholes.

Sometimes, the sale is not completed but the land is transferred to the purchaser. So, data is not available to the Housing Ministry.

There are also instances when plans are submitted stating that 500 units will be built, but the developer decides to build 200 units only and sell half.

The full information is not provided. But when the ministry issues the licence, the number of units to be built and sold are stated as 500. This is an issue when it comes to data collection.

Jayaselan says this is happening especially on commercial land. Small offices home offices (SoHos) and serviced apartments are built on commercial land. He says the government is working on a Commercial Development Act to fill the vacuum for a legal framework governing such constructions.

Developers are increasingly moving away from residential units to commercial units. Each state does things differently, so “creativity” takes place in different ways, he says.

Because there is no single coordinating agency or a regulatory body, things can get complicated.

PR1MA may say it wants to construct 500,000 units, but only complete 11,000. This is because it has consigned some of the units to a private developer. So, there is an issue with the numbers. The private developer, having completed a certain number, wants this to be reflected in its books.

Such issues have to be resolved between public housing agencies and private developers.

The private developers want their profit margins and the government is considering the social element attached to housing. These two differing goals will have to meet somewhere. There is a certain degree of corporate social responsibility involved.

“There are many ways to work things out,” he says.

The government is suggesting an affordable pricing threshold of about RM300,000, but private developers are looking at RM500,000.

“We are looking at different regions in the country, namely, north, central and south, but holding to the RM300,000 as a cut-off point. But this is still at an initial stage, so both the private and public sectors have different goals and need to consider.

“We will be able to work it out,” he says.

The various parties differ even in the collection of data. The National Property Information Centre collects until the last five units are sold, whereas another department may not be so detailed.

The housing industry has evolved tremendously over the years. Before, there were no serviced apartments or SoHos but today these units are built on commercial land.

Hence, there are so many things to iron out and this will be done in due course.

Jayaselan says the various issues between private and public housing are inter-related and it is the lack of planning that has resulted in the public housing situation today.