Ironing out the affordable housing issue

The interest and different issues surrounding the property sector made the National Housing Department director-general a popular target for questions at the Affordable Housing Seminar 2018. StarBizWeek caught up with Jayaselan K. Navaratnam in a Q&A as below:

Is it likely for a US style sub-prime crisis to happen here if interest rates are lowered for buyers of afforable housing as being discussed by the Housing Ministry?

No. For example, you buy a house for RM200,000 and its value moves up to RM300,000. The bank offers you an overdraft of RM100,000 and if the housing industry crash, that subprime scenario is created. But this is not the case here. We are not giving the house owner that cushion. We are looking at helping a person to make a solid purchase.

Will affordable housing be subject to a lower interest compared to market rates?

This is being discussed with Bank Negara. We have to look at loan tenure, interest, income and debts. Will their contribution to repayment be more on interest rather than on capital? Are we giving them a burden? If the total loan is RM300,000, what is the total value at the end of it all? Is it RM500,000 or RM600,000?

So we are asking banks to consider if there is a special interest for houses below RM300,000 and for genuine house buyers.

Everybody can claim to be a first-time home buyer but we are talking about a real first-time buyer. This is another issue we have to work with the income tax department.

Why is there a need for a Commercial Development Act?

There is a need because we want to build a vibrant city. A retail mall at the bottom with residentials on top will help to reduce the need to move from one place to another. But we need to manage such developments.

We looked at Singapore and other countries. Right now, we do not have a standard sales and purchase agreement (S&P) for such commercial developments.

A buyer of such a commercial development may be able to claim for defects and they may have a place to go to.

Many developers are moving away from residential to a commercial development. A standard S&P will give buyers that assurance.

How long will it take for such an Act to be ready?

It will take us at least two years to study. We are also going to have a Rental Act (to promote the rental market).

With the scarcity of land with complete infrastructure like roads and amenities, where are the affordable housing projects going to be located?

We are looking at wakaf land. We want to try to use as much land for residential development. This will also be within the new guidelines. We have a lot of wakaf land.

To private developers, time is money. Can the gestation period be shortened?

Developers own the land. If they are confident, they build and they are entrepreneurs. They have in their mind what they want to do. The government also has its plans. So we need to come to an agreement. We take two years to get a development order. We are working to speed up the process.

Has May 9 speeded up the process for the housing policy?

We started the national housing policy 1½ years ago. The minister now wants a public housing policy within this national housing policy.

We are trying to do things in a better way and we are asking architects to help us. What is the best way to design a house? Let the design adapt to the nature of our environment.

Are we against foreign buyers?

We are not against foreign buyers but we find that most developers tend to increase prices in order to meet the criteria/threshold that a foreigner is able to buy.