11/19/2016

NewstatehousingpolicygetsmixedreactionBusinessNews|TheStarOnline

New state housing policy gets mixed reaction

by wong wei-shen

Joint efforts: Market players say affordable housing is a social issue, and hence the individual state governments should get involved
and not place the responsibility solely on the developers.

Developers hope policymakers consider possible implications on Negri Sembilans property market
THE new housing policy in Negri Sembilan is causing a stir, with speculation that it could mean higher
prices for homebuyers and the exit of some developers from the state.
The battle between prots and home quality could also come into question, with the policy possibly
being equated with higher costs for developers.
At risk is the Malaysia Vision Valley, a 108,000ha project under the 11th Malaysia Plan (11MP) in Negri
Sembilan, which aims to be an integrated development that will complement the Klang Valley.
How the new policy could affect the state, as well as the Vision Valley project, will be more transparent
only when details are released.
It is a known fact that land prices are no longer cheap. In many cases, the land costs make up for
between 20% and 30% of the total cost for developers.
If developers buy a piece of land in a prime location and the enforced rule is to build 50% affordable
homes, the developer may not actually be able to return a prot. This is a discouragement of capitalism,
entrepreneurship and development, says PPC International Sdn Bhd chief executive ofcer Siva
Shanker.
Negri Sembilans new policy, which took effect on June 5, sees affordable houses making up for at least
half of the new houses to be built in the state.
Out of half of the quota for affordable houses, 15% must be priced below RM80,000 and another 15%
below RM250,000. The remaining 20% must be priced below RM400,000.
The developer is free to set the prices for the rest of the new houses.
Under the new policy, the bumiputra quota in the state has also been increased to 50% from 30%
previously.
Negri Sembilan Mentri Besar Datuk Seri Mohamad Hasan was quoted earlier this month as saying that
the houses priced below RM80,000 must be landed residential units not smaller than 20 ft by 60 ft.
These houses will not be privileged to the bumiputra discount.

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NewstatehousingpolicygetsmixedreactionBusinessNews|TheStarOnline

Siva: This is a discouragement of capitalism, entrepreneurship and development.

This is because poverty knows no race ... Whoever is qualied to buy this category of houses will buy
them at the price xed by the developers, he says.
Mohamad says the state increased its bumiputra quota because 70% of residents in Negri Sembilan are
Malays and bumiputras.
He said the policy was enforced after discussions with the Negri Sembilan Real Estate and Housing
Developers Association Malaysia (Rehda).
Pressure on developers
Chang Kim Loong, the honorary secretary-general of the National House Buyers Association, says the
policy could also keep developers from entering the Negri Sembilan market.
Compliance with these new policies may not provide reasonable prots for the developers, and thus,
provide more reasons to cut corners and construct defective houses, shoddy workmanship and using
sub-standard materials. This will not benet the house buyer, says Chang.
He hopes the policymakers consider the possible implications on the states property market. Even at
present times, it is suspected that some developers have unsold bumiputra units and are a drain on the
resources of some developers.
The end result is that some developers may not want to get into the property development business in
Negri Sembilan and this may not be good for the industry or the people or the Government policies. After
all, developers are not charitable organisations; they are in for the prots, Chang says.

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Chang: Compliance with these new policies may not provide reasonable prots for the developers.
Malaysia Vision Valley will be in western Negri Sembilan covering Nilai, Seremban and Port Dickson.
The project can be seen as a new growth area, as it provides an alternative for those seeking more
affordable housing compared to what one would have to fork out for a property in the Klang Valley.
Whether or not this would mean new highways and infrastructure to improve connectivity to the Kuala
Lumpur city centre is yet to be known.
Rehda Negri Sembilan chairlady Jenny Wang says no details on Vision Valley have been conveyed yet,
and only knows about the project through the local media.
One big effect from the new housing rules in Negri Sembilan is bumiputra lots.
Its a known fact that most developers are struggling to sell their bumi units. If you have to carry them
for a number of years, it is going to incur cashow and interest and the developer is going to project that
into his cost and will increase it accordingly, says Siva.
Chang reiterates that this could result in property developers exiting the Negri Sembilan market in the
short-term vision to gain popularity. It is akin to a small population of the rakyat nancing house
ownership for the majority, he says.
To deal with this, the state government will launch a bumiputra housing portal that will list unsold units.
After this, it is hoped that the developers would no longer complain about the difculty in selling the
bumiputra lots, Mohamad says.
Wang looks forward to the release mechanism. With that, if a developer can judge that they really
cannot sell to bumi buyers, we can work together, she says.
The state government or government-linked companies (GLCs) buying up bumiputra units could be
something to chew on, Chang adds.

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If the Negri Sembilan state economic agency or their GLCs can absorb it or are seriously conscious of
wanting to ensure 50% bumiputra house ownership, then they should buy up those unsold bumi units
from the onset rather than dicing with the slow mechanism of release of bumiputra units to the nonbumis.
Market dynamics affected
Siva adds that it is important for the issue of affordable housing and property development to be
separated.
They cant go hand in hand. Everything cant be affordable when living costs and building costs have
gone up. It comes to a point when affordable means compromising on something, which is either the
location or the size or the quality and deliverables, he says.
This would mean that more afuent buyers of the property are truly subsidising the others. Its not fair
to ask the rich to pay extra money for their houses so that the poor and middle class can buy another
house, Siva says.
He stresses that capitalism and social responsibility have to be separated. One possible way is to have
the more luxurious developments done at a prime location, whereas the more affordable ones are
slightly further away and perhaps smaller in size.
It would be unfair to ask a luxury carmaker like Mercedes or BMW to compel them to produce 50% of
the cars they make in the lower price segment. Its the same if you ask developers to do this, Siva says.
Affordable housing is a social issue, and hence the individual state governments should get involved
and not place the responsibility solely on the developers.
The developers are in this game to make a prot for their shareholders. If you ask him to compromise
his prots for social responsibility, yes, he will do it to some extent, but he isnt going to like it if you force
him to do it every single time, Siva explains.

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Seeing that the policy has been implemented in Negri Sembilan, this may spur other states to follow
suit. But Wang says other states would only look at carrying out policies that address their specic
needs.
Industry experts say the implementation of the policy would not impact the general property market
much, as Negri Sembilan is a small state. The total value and transaction is not as big.
If it was in Selangor, the Klang Valley, Penang and Johor, then we would have something to worry about.
Its not so signicant at the moment, Siva says, referring to the impact on the entire property market.
But the impact would be felt more on the buyers perception. Things like these are very detrimental to
perception among the buying public, he says.
Now that it has been implemented, the fear of it being implemented in other states is there.
Siva says while it may be an isolated incident, it is undeniable that everyone out there is saying that it is
going to get worse.
For the rst time in about three years, the values transacted in the rst quarter of 2015 remained the
same. Although transactions have been on a downtrend since 2012, values still rose.
Siva says the blame can be put on the start of the goods and services tax.
But I also think perhaps theres a lot of doom and gloom in the market due to 1Malaysia Development
Bhd, the ringgit, and oil prices although it is stabilising now. But these are things that people feel worried
about, and the rst thing they will do is stop buying.
They adopt a status quo mentality: wait and see. Although we dont want prices to go up so high, as its
not healthy, we want steady growth that is sustainable over the long term, he says.

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