Private developers want flexibility for low-cost obligations

Developers would be able to build more low-cost units should the govt provide more incentives


Private property developers said the requirement to build low-cost units at non-strategic areas in all states should not be made mandatory as it affects their profit margin.

Real Estate and Housing Developers Association Malaysia (Rehda) president Datuk Seri Fateh Iskandar Mohamed Mansor said the federal government should consider making it more flexible for developers to substitute the building of low-cost units with some form of contribution to each state.

“It would be more cost efficient for developers to pay a levy of between RM4,000 and RM5,000 for each unit not developed to the state government, of which the funds collected can be used to build low-cost housing units at a more strategically located land,” he told reporters at the launch of Rehda’s Property Industry Survey (PIS) for the first half of 2017 (1H17) in Petaling Jaya yesterday.

“When a developer builds anything on more than 4.05ha, we are obliged under the current law to develop between 40% and 50% of the total project for the low-cost housing units.

“There is no standardised regulation between the local government and the federal government. This has caused unit priced at RM40,000 upon market entry to drop to as low as RM10,000 in the sub-sale market due to poor demand,” he said.

Fateh Iskandar explained that private developers would be able to build more low-cost housing units, while still able to sustain their business model should the government provide more incentives to aid in the process.

According to him, the exemption from market rate premium with higher plot ratio and density, the abolishment of infrastructure contribution, and marginal development charges are needed to provide a win-win situation between the government, private sector, and the consumers.

“With more leeway given, we can fully commit to build more housing units within the affordability bracket without severely dampening our profit margin.”

“Developers now are charged between 24% and 25% of conversion premium, which is relatively high compared to the 5% to 6% fee imposed six years ago,” he said.

Additionally, Fateh Iskandar said the mismatch of supply and demand in the low-cost housing segment is due to the development located in decentralised area, which in turn, resulting in a market overhang.

Among the low-cost housing units currently available in the Klang Valley are Federal Territories Housing Scheme and Selangorku Houses.

Commenting on the upcoming Budget 2018, Fateh Iskandar said more emphasis should be given to solve the end- financing and lower loan margin issues given by financial institutions to purchasers as these are the main challenges faced in the market today.

“We are also hoping for the government to consider reducing the cost of doing business especially in terms of the compliance cost and premium rate in order to make it more feasible for us to build more affordable homes.

He said Rehda will release their Budget 2018 wishlist either by end of this month or early October.

Rehda’s newly launched PIS revealed that number of future launches on residential units priced below RM500,000 continue to increase in 2H17.

Residential properties continue to lead new launches with 53% of them comprising strata units despite volume drop in overall performance by 9% from the preceding half (1H17:32%, 2H16:43%).

Although there is a reduction in new launches, sales performance showed slight growth from 45% to 48% in landed residential developments, while the number of launches for both residential and commercial was reduced by 31% and 34% against the previous half.

Albeit the reduction, similar percentage of 4% for commercial units launched was recorded for 1H16 and 2H16. There was also approximately 41% unsold units for properties priced below RM500,000 in Johor, Kedah, Melaka, Pahang, Perak and Perlis.