For the 80% of Malaysians earning less than RM3,000, My First Home Loan Scheme and PR1MA are way off the mark
The impracticability of the Skim Rumah Pertamaku or My First Home Loan Scheme (SPR) demonstrates how out of touch the Barisan Nasional government is with the economic realities faced by average Malaysians living in the no-buy zone.
Despite the hot air generated since SRP was first announced in the 2011 budget, only 485 loans have been approved to date. This hardly makes a dent in the statistics of Malaysians who cannot afford to purchase property with the skyrocketing prices particularly in urban areas.
My First Home Loan offers 100% loans to those earning below RM5,000 per month with a house price ceiling of RM400,000. On paper, this sounds like a good solution to ease the house-hunting dilemma of young working adults. In fact, calculations will show that the figures are too good to be true.
SRP loan unrealistic and high risk
A 30-year-loan for RM400,000 with a 4.4% interest rate would require a monthly repayment sum of RM2,003. Given that 80% of Malaysian households earn less than RM3,000 per month, it is unrealistic to expect them to be able to afford the SPR home loan.
If the borrower earns a RM3,000 monthly salary, this amounts to 67% of his gross monthly income and 77% of his take home pay (minus EPF contribution). No bank in their right mind would approve such a loan.
This explains why, from 2011 until May 2013, only 485 such loans have been approved, out of the 1,410 applications. These statistics were given by the Ministry of Finance in a parliamentary reply dated 3 July 2013.
How many houses has PR1MA built?
Announced in the 2013 budget, Perumahan Rakyat 1Malaysia (PR1MA) is a government initiative to build and sell homes costing below RM400,000.
To qualify for balloting to purchase these houses, individuals or couples must earn between RM2,500 and RM7,500 per month.
PR1MA has targeted to build 80,000 affordable homes (50,000 by PR1MA and 30,000 by joint venture with the private sector). I asked a parliamentary question about how many homes have been completed so far.
The answer given to me by the Ministry of Finance on 3 July 2013 was less than satisfactory. So far, 560 units are in the process of construction in Putrajaya and 201 are also being built in Nusajaya, Johor.
At the current speed, it will take 105 years to build the 80,000 units of PR1MA houses and to sell them is another major problem.
Current planned locations for the other PR1MA projects are in Seremban, Kuantan, and Penang. There are currently no PR1MA projects being planned in Sabah and Sarawak.
PR1MA’s plan alone (whether or not it comes to pass) cannot solve the housing conundrum.
I urge the government to consider a semi-rental or shared equity model to this end.
The need for social housing will not diminish even when household incomes are raised, and the government cannot wait for developers’ conscience to be pricked to implement corporate social responsibility projects.