Businessman Tan Sri Vincent Tan (file pic) wants to push his ambition of making homes possible to the low-income group as the size of the B40 group has reportedly grown to become B50 now.
IT’S been 10 months since tycoon Tan Sri Vincent Tan announced his affordable home project for low-income Malaysians, notably the B40 (bottom 40% or poor) group.
“In just that short period, we now hear reports that it is now B50 because the middle class has slid down.
“M40 has reportedly deteriorated to now M30, according to some news reports because of the impact of the Covid-19 pandemic.
“It has become more urgent that the affordable home project for the lower income gets going soon,” the Berjaya Corp Bhd chairman said, over a vegetarian lunch interview.
The B40 are Malaysians who have a combined household income of less than RM5,000 per month.
Vincent, who heads the Better Malaysia Foundation (BMF), has launched a new social enterprise programme to assist the government in addressing home ownership aspirations.
He has done his homework, evaluated the costs and learned that loans are a major stumbling block for the B40.
Other related issues can only be ironed out by the government and banks.
Vincent is pushing the concept that BMF, in collaboration with Berjaya Land Bhd, has designed a 900-sq-ft five-bedroom, four-bathroom show apartment specifically for this initiative.
The Batu Pahat born self-made billionaire said he was “extremely disturbed and sad” that almost half of Employees Provident Fund (EPF) members have less than RM10,000 in the accounts and that only 3% of these low-income Malaysians can afford to retire at 55-years-old and sustain it with their savings.
Vincent understood what it was like to be poor, as he had to forgo a tertiary education because his lorry driver father could not afford it.
There were eight siblings in the family, and eventually he found work as a bank clerk instead and then sold life insurance.
Both he and his businessman brother, Tan Sri Danny Tan, had to share a rented room when they first came to Kuala Lumpur to work.
Danny, who had only a kap cai motorcycle, even travelled to villages to sell encyclopaedias, before joining his elder brother to sell insurance.
Looking at the plight of the B40 now, Vincent said: “The pandemic has made it worse for many Malaysians. Many are still struggling as businesses have closed and wages slashed.”
The EPF has warned that this could have huge socio-economic implications following the Covid-19 pandemic and stressed the importance of adopting a holistic approach to address the issue.
EPF, in its latest findings, reported that most of its members in the low–and middle–income groups are likely to live in poverty in old age unless mitigation measures are taken.
The data showed a 60% decline in median savings among the 5.05 million EPF members in the low-income group (Bottom 40) from RM2,434 (RM10 per month for 20 years) to RM1,005 (RM4 per month for 20 years) post-pandemic.
Vincent said these developments had made it even more urgent that these households have a roof over their head and there was validity for his proposal.
The situation in Klang Valley and major cities are grim. For every 1,000 units launched in the Klang Valley, it is said that between 10,000 and 60,000 applicants apply to purchase them.
According to Khazanah Research Institute, current trends indicate that both the B40 and a segment of the M40 of income earners require some form of social housing or assistance in buying their first home.
Vincent said he hoped to meet the various stakeholders and key figures at the federal and state governments to explain to them the significance of the proposal.
The 69-year-old philanthropist understands fully that advocacy isn’t enough and as a businessman, who likes to pride himself for being practical and results-oriented, he wants to make the idea work.“I hope they (the politicians) will still open their doors for me because I don’t want them to get frightened by my persistence,” he laughed.
Vincent shared that his idea of a five bedroom, with four toilets, in a 900 sq feet flat had been mocked.
“Come to see the model flat at Berjaya Times Square. It can be done. Can you imagine a family of six? The father and mother take one room.
“If there are three girls and one boy, how do they share the remaining one room, as it is now with low-cost flats?
“Many live in the tiny hall and sometimes, brothers and sisters share rooms. It’s not conducive. Many low-income families may be poor but they are blessed with many children.”
Tan said he had also met two banks to work out a good housing loan proposal for the low-income home buyers.“I trust that the less privileged will be good at servicing their loans. Better than the rich,” he said, citing the experience of the Grameen Bank’s microcredit project in Bangladesh with a 90% recovery rate.
BMF identified that high land prices in urban areas is one of the key current issues.
It suggested that land be provided on lease by the government or be subsidised, with an assurance that the lowered cost be translated to the lower house prices for the B40.
It said the government can offer land at subsidised prices or leased for a 99-year period to property developers catering to the B40 sector.
Apartment sizes and selling prices should be controlled as per those in the affordable housing guidelines, it added.
“There is potential for the B40 home prices to be lowered when land cost is taken up by the government. Homes cost can be lowered from the original RM300,000 for a 900 sq ft unit in Kuala Lumpur and RM250,000 in Selangor when land cost is taken out of the equation via a 99-year government lease.
“This will allow for lower monthly mortgages, close to current rentals, thus improving the eligibility for the B40 to purchase.
To tackle the issue of the B40 group unable to apply for housing loans due to financial difficulties, the BMF has suggested innovative finance solutions.
It has put forward two key proposals for lenders to provide 100% financing for the 35 year or extended loans among family members and for the government to guarantee a portion of those loans.
“The affordable housing shortage for the B40 group must be addressed urgently. Those who are now able to rent their properties may not be able to keep up with their rental payments when they retire or are no longer gainfully employed for whatever reason,” Vincent said.
He said for the idea to come to fruition, several conditions have to be in place, including the government support to charge lower land premiums and nominal development charges for affordable housing projects. By doing so, the government will help to give affordable housing a shot in the arm.
Vincent urged the federal and state governments to sell development land at a low cost to developers to build affordable housing projects, especially in urban locations close to transport hubs.
BMF’s second proposal is for lenders to provide 100% financing to B40 house buyers.
The foundation’s research has shown that several banks are already offering 100% financing to house buyers with a minimum income of between RM2,000 and RM3,000 per month, including RHB Bank, Malayan Banking Bhd, CIMB Bank, OCBC Bank, MBSB, Bank Rakyat, AmBank and Affin Bank.
However, it states that 60% of loan applications by prospective buyers of affordable homes are rejected due to age or poor credit scores.
Vincent said rejecting a housing loan is akin to a life sentence for the B40 applicant, adding that many first-time house buyers are unable to come up with the down payment required for buying a house.
This will be resolved if lenders provide 100% financing, he pointed out.
He urged the government to implement strategic initiatives for banks and financial institutions to provide 100% financing to B40 house buyers with two-generation home loans of between 40- and 60-year duration so that loan repayments would be affordable and manageable.
He has even suggested that the government guarantee the home loans of B40 house buyers so they can be offered at a lower interest rate.
According to the BMF, banks and financial institutions must also play their part by providing loans with 100% financing to the B40 house buyers.
“We understand that the loan applications of 60% of buyers of affordable homes are rejected by banks and financial institutions due to age or poor credit scores.
“The key problem is the rejection of loans, which has also affected property developers who want to build affordable homes in allotted areas.
“So, even well-meaning developers have found this to be a major hurdle as they, too, need to pay the banks when construction begins for these affordable flats.”
But Vincent can’t pull this off unless the government extends support in terms of charging lower land premiums and nominal development fees for these housing projects.
The federal and state governments must also be willing to sell development land cheaply to developers to build affordable houses, especially in urban locations close to transportation hubs, which would translate to lower purchase prices for low-income house buyers.
The BMF believes that affordable housing can be realised with pricing going from RM120,000 to RM300,000 for an apartment in the Klang Valley, with sizes starting from 450 sq ft, 600 sq ft, 750 sq ft and up to 900 sq ft.
The foundation also conducted a survey on 1,700 employees of a private business organisation who fall within the income range of the B40 group,
The survey’s focus was on the amount B40 employees were paying for renting a room or a house.
From the survey, it was ascertained that the B40 employees were paying an average rental of RM900 per month for housing in the Klang Valley. That means the RM900 rental paid each month covers the monthly loan repayments of RM899 had the employees been able to obtain a 100% financed, 60-year loan of RM300,000.
“The key takeaway from this is that the monthly rentals can be “converted” into monthly loan repayments, so a B40 person can buy his own home. It is imperative that housing loans for the B40 group are 100% financed for a term of 40 to 60 years, so that monthly repayments are affordable, and the two-generation feature is adopted.”
Many wealthy Malaysian parents have begun buying homes for their children because they know it will be tough for them.
For those renting homes, it gets more difficult to secure bank loans when they grow older. It could get even worse when they can’t afford rent because they’ve retired.
But for the B40, they may end up homeless. And that could take us from enduring social and criminal problems, right through to navigating past a political storm.
“Investing in people, especially homes for the lower income, is a good thing. Malaysia can afford it if we review whether we need some of the mega-projects.”
