Thursday 28 Mar 2024
By
main news image

housing_11Feb15_theedgemarketsPUTRAJAYA: A housing guarantee scheme to safeguard the interests of homebuyers and developers is under consideration by the government.  Urban Wellbeing, Housing and Local Government Minister Datuk Abdul Rahman Dahlan said that under the proposed scheme, a corporation would be set up in which the government would take up a 70% stake. The remaining 30% could be taken up by the Real Estate and Housing Developers’ Association Malaysia (Rehda) or government institutions with funding capability such as the Employees Provident Fund (EPF) and Lembaga Tabung Haji.

“Under the proposal, the government would come up with 70% of the initial capital. According to calculations, the basic capital is about RM400 million, 70% of which is RM280 million, to be injected into the corporation,” Abdul Rahman told a press conference after chairing the roundtable discussion on the scheme. The discussion was organised to get input from representatives of South Korea’s Housing Guarantee Co Ltd, industry players and banks.

The housing guarantee scheme is designed to guarantee the completion of a housing project by charging a minimal amount of premium, ranging from 0.5% to 1% of the house price. The government hopes the developers will absorb the charges in their cost.

If the housing project is not completed, the corporation will take over and complete it, to ensure that the properties are delivered to the buyers, Abdul Rahman said.

On funding its 70% stake in the proposed corporation, Abdul Rahman believes the government would not need to fork out the money from its own coffers but could utilise the levy developers pay to the Construction Industry Development Board (CIDB) Malaysia.

“The [CIDB] fund is [currently] used for training, but there are still lots of money in the fund. So, I don’t see the government needing to come up with the money,” he said.

Abdul Rahman said the government is still at the stage of getting input on the scheme as it would have a far-reaching impact on the industry, and the relevant laws would need to be amended. He added that the model is expected to be finalised at “the earliest next year”.

Also present at the event were representatives from South Korea’s Housing Guarantee Co Ltd. The corporation, which was established in 1982, has not only ensured the delivery of houses in South Korea but it is also a successful self-sustained entity.

Speaking on the benefits of the scheme on a broader perspective, Abdul Rahman said it could help to stabilise house prices in the country. He said that as housing projects are guaranteed, banks could look to lower interest rates because there would be no default risks.

“For this to succeed, we need to make this compulsory, only then it make sense,” he said noting that the roundtable is the first step for the government to deliberate on the housing guarantee scheme.

Meanwhile, Rehda patron and past president Tan Sri Eddy Chen, who also attended the roundtable, told The Edge Financial Daily that the association welcomes the scheme as it would help prevent abandoned housing projects.

“The scheme will conduct strict due diligence and thereafter credit rate all developers which desire to carry on the business of housing development. This has proven to be immensely helpful in South Korea which successfully addressed all issues related to abandoned housing projects.  

“No house buyers have suffered from any abandoned housing [projects] since the inception of the Korea Housing Guarantee Co Ltd,” he said.

 

This article first appeared in The Edge Financial Daily, on February 11, 2015.

      Print
      Text Size
      Share