Besides the possibility of the Government providing land for free or at low cost, another issue surrounding the My First Home (MFH) scheme is the general consensus that it is unrealistic to have the same limit on monthly income and property price across the country. To date, it has been announced that houses under the scheme are priced from RM100,000 to RM220,000 per unit, and to qualify, buyers must have a monthly salary of not more than RM3,000.

Developers are of the view that the higher land values in the Klang Valley and major cities should be reflected in the MFH scheme.

“The scheme should reflect the higher land values, living costs and incomes in the Klang Valley and major cities to ensure there is no mismatch between demand and supply,” says Mah Sing Group Bhd group chief executive and managing director Tan Sri Leong Hoy Kum.

Leong and other developers say a price limit of RM350,000 is more realistic in Greater KL and Penang, and the monthly income limit should be raised to RM5,000.

Real Estate and Housing Developers’ Association (Rehda) president Datuk Seri Michael Yam says the present threshold household income for the purchase of low-cost houses is RM2,500, which is just RM500 less than the RM3,000 income limit for MFH buyers.

The minimum property value of RM100,000 should be set aside so that those who are not entitled to the RM42,000 low-cost homes be given a chance to own a property, says Yam.

Loan financing is another issue linked to the MFH scheme. National House Buyers Association (HBA) secretary-general Chang Kim Loong says buyers with a monthly income of RM3,000 may have problems with mortgage payments, despite the 100% financing provided under the scheme.

Chang explains that based on the previous BLR (base lending rate) of 6.3% and a “market rate” of BLR less 1.8%, the effective interest charged to a house buyer is about 4.5% per annum. Generally, banks practise a rule of thumb whereby any single loan repayment should not exceed one-third of the borrower’s gross pay.

“For a RM220,000 housing loan with a tenure of 30 years and 100% financing, a buyer with a monthly salary of RM3,000 would be paying monthly repayment of RM1,115, which is 37% of his gross monthly salary. These borrowers would not have much savings and could default on their loan obligations in the event of personal emergency expenses. Also, it would be impossible for these house buyers to take up additional loans to buy cars.”

Chang calls for home buyers under the scheme to be given a preferential interest rate of 3% fixed throughout the loan tenure. He also says the Government must make it compulsory for MFH projects to be based on the 10:90 BTS (build-then-sell) concept to give maximum protection to home buyers and to shield the Government from potential liabilities as such projects are easier to revive in the event they are not completed.

Under the BTS concept, a buyer only pays 10% of the price on signing the sale and purchase agreement, with the balance to be settled only after completion of the house.

Yam of Rehda concurs with Chang and calls on banks to allocate a block of loans at preferential interest rates with longer loan tenures and with the provision of having joint multiple borrowers.

SOURCE: The Star