Despite the various initiatives rolled out by the government, the inability of households from the M40 and B40 category to acquire their own homes has been a long-standing issue facing the country, according to Putra Business School Economic Analyst Associate Prof Dr Ahmed Razman Abdul Latiff.

And with the COVID-19 crisis, Malaysia’s homeownership situation is expected to become even more challenging as over 600,000 households from the M40 group have fallen into the B40 group, reported Bernama.

“It’s a serious matter that (has existed for several years and) has yet to be resolved,” said Ahmed Razman.

“The M40 householders who have fallen into the B40 group also need help to buy a house but I’m worried that they may not be eligible yet for the affordable house ownership programmes meant for the B40,” he told Bernama.

While the government made the right move to build low-cost homes and facilitate housing loans for such group, he believes that it is still not enough.

Under Budget 2022, the government pledged to implement RM1.5 billion worth of housing projects for the low-income group.
Ahmed Razman noted that as long as the main issue is not addressed, the country’s homeownership problem will continue to grow more critical.

It will also provide a RM2 billion guarantee via the Housing Credit Guarantee Scheme in 2022 to facilitate loans for those with no fixed income, such as gig workers, farmers and micro-entrepreneurs.

“I’m sure people are happy with the announcement that more affordable housing units will be built but if they do succeed in getting a loan, the financing cost will end up being higher than the original cost of the house due to the high interest rate,” said Ahmed Razman.

“Let’s say they buy a house priced at RM300,000 and get a loan which has to be repaid over 30 years at an interest rate of six percent. This will work out to a monthly repayment of RM1,798 and at the end of the loan period, they would have paid a total of RM647,514, which is more than double the original price of the house.”

This high housing loan interest rates charged by banks is what deter the low-income groups from purchasing a house since they cannot afford the monthly loan repayments.

As such, Ahmed Razman urged the government to offer alternative financing options which do not involve banks.

To facilitate homeownership among the M40 and B40 groups, he proposed an alternative house financing product which is more appropriate with the Islamic financing concept Musharakah Mutanaqisah since it does not involve interest charges.

Under Musharakah Mutanaqisah, a government or corporate entity will jointly acquire a property with a house buyer. The ownership share of the corporate entity or government will be leased to the house buyer for a certain period.

“This method allows people to pay a certain amount first and then pay the rent little by little which will end with them owning the house with no interest payment. The rental rate is determined by the rental index in the area where the house is located and will be renewed after a few years,” explained Ahmed Razman.

In case the buyer defaults on the payments, the government or corporate entity will sell or auction the property, with the sales proceeds divided among the agency and the owner based on their respective share of ownership.

The proposed financing concept should be implemented by a cooperative or government agency that is not after making huge profits, said Ahmed Razman, adding that it is not suitable for banks since they are profit-oriented.

He believes that the concept is feasible for implementation in Malaysia, citing the success of Canadian cooperative Ansar Co-operative Housing Corporation Ltd, which implemented such concept for its members to help them acquire their own houses.

“It can be implemented in Malaysia if the people, especially potential homeowners, request the government to provide them with the Musharakah Mutanaqisah facility. Housing developers will have no objections as they will get to sell their houses as usual,” said Ahmed Razman.