Business

Saturday August 18, 2012

Uphill battle for developers


REHDA president Datuk Seri Michael Yam says the challenges facing property developers are tremendous. Some of these challenges are unavoidable and had directly or indirectly contributed to the high cost of properties.

“There is high cost of compliance with various policies and regulations in the property development industry. The scarcity of affordable land and the increase in land cost in today’s uncertain economic climate are some of these challenges.

“Developers have to contend with operating within a highly-regulated industry; rules and regulations are constantly changing,” he says.

Another heavy burden is the building of low-cost housing which also invariably and indirectly adds to the cost of houses for the masses.

He also questions the registration and distribution system of low-cost housing as it is believed that more than half of some low-cost housing projects are occupied by foreigners. Many of these low-cost housing units are also not sold.

Yam: ‘This principle to help bumiputras to own real estate invariably marginalises them because they can only sell these units to fellow bumiputras at a discounted rate.’ Yam: ‘This principle to help bumiputras to own real estate invariably marginalises them because they can only sell these units to fellow bumiputras at a discounted rate.’

He says the private sector has contributed up to one million low-cost units to date. During the Eighth Malaysian Plan (2001-2005), 40,000 units were targeted; the private sector exceeded this target when it provided 97,294 units.

The same thing happened during the Ninth Malaysian Plan (2006-2010) when the private sector provided 78,500 units when private developers were expected to build 77,700 units.

Another challenge is the imposition of cross subsidies in the form of quotas and discounts.

He says the discounts enjoyed by bumiputra buyers are borne by the non-bumiputra purchasers which effectively push up the price of the houses.

Yam says some of these bumiputra units are not sold and this represent a cost to developers as they work towards the release of these units to non-bumiputra buyers. “Free us of these policies and regulations. Release us from having to meet this bumiputra requirements.

“This principle to help bumiputras to own real estate invariably marginalises them because they can only sell these units to fellow bumiputras at a discounted rate,” says Yam.

Yam also calls for a review of planning requirements and an increase in the plot ratio.

He says there are increasingly more shoe box-sized serviced apartments entering the market and this trend is due to developers having to “cut” units smaller in order to increase affordability as the bigger the unit, the higher the price of the unit.

Yam appeals to the Government to increase the plot ratio which effectively allows developers to build upwards.

“The problem is, when a developer builds small units, he has to meet car park requirements, and this again increases the cost of the overall unit as each of the small units will come with a car park.

“I am glad that the Green Building Index is not yet mandatory, as every time there is an increase in specifications, the cost goes up,” he says.

In the area of financing, he says when a developer applies for bridge financing in order to complete a project, the longer the developer holds the land, the higher his holding cost.

“We would like to appeal to the Government to speed up approvals.”

As for the home buyers, Yam suggests that the Government help first time buyers with innovative financing packages and to free up government and state land for affordable housing.

For the medium to long-term, he calls on the Government to refurbish buildings to convert them to affordable housing and to review Malay reserved land and new villages for the development of affordable housing. He also suggests building residential housing near and above public transportation infrastructures.

  • E-mail this story
  • Print this story
  • Bookmark and Share