Monday, January 30

Sabah: Promoting home ownership


Federal government schemes expected to increase demand for housing will be a welcome boost for Sabah’s construc­tion sector, which has seen several challenges recently, at the same time that a growing real estate investment trust (REIT) market is focusing on the state’s capital city.

In early August, the Ma­laysian REIT Managers As­sociation (MRMA) hosted a road show in Kota Kinabalu, the state capital, giving local residents a change to review opportunities to invest in the growing REIT segment.

REITs have become a major asset class in recent times throughout Asia, with the re­gional market (minus Austral­ia) reaching US$101.1billion earlier this year.

In Malaysia alone, the REIT sector is worth around RM10billion(US$3.35billion), according to the MRMA, with some 14 REITs currently listed on the country’s stock exchange.

Two of the largest are Sun­way REIT and CMMT REIT, which have combined as­sets of some RM5.83billion (US$1.95billion).

The MRMA itself is a rel­atively new organisation, formed only in May last year, with a mandate to represent and promote the sector nation­ally and internationally.

Showcasing the REIT alter­native to Sabahan investors was thus a step to expand this market, with Kota Kina­balu selected as the host location thanks to its recent demographic and economic growth.

The city is now home to around 48 per cent of Sabah’s three million people and ac­counts for about 26 per cent of Sabah’s GDP.

This placed the city eighth in Malaysia’s urban league table for wealth contribution in 2010. But Kota Kinabalu is not only a target for REIT managers: it is also the focus of attention from real estate and construction investors more generally.

Indeed, these are potential boom times for the sector, par­ticularly since the unveiling of the ‘My First Home (MFH)’ scheme by Prime Minister Na­jib Razak earlier this year.

While it is a Malaysia-wide scheme, the MFH may have particular impact on Sabah.

Under the MFH, first-time homebuyers can apply for up to 100 per cent financing.

Some 25 conventional and Is­lamic financial institutions are expected to participate in the programme, while Cagamas, Malaysia’s national mortgage corporation, will guarantee 10 per cent of the loan for borrow­ers who finance 100 per cent of the cost of the house.

The state government is currently studying how best to implement the scheme locally.

In July Sabah’s Housing Min­ister, Datuk Hajiji Noor, told members of the Sabah Housing and Real Estate Developers’ As­sociation (Shareda) that “own­ing a home is the major item in the dreams of Malaysians.

We want to be able to make that dream come true,” he added.

Another federal initiative, the 1Malaysia Housing Pro­gramme, known as PRIMA, may also boost the sector.

While this scheme, which involves the construction of 42,000 houses on 20 strategic sites, is currently being carried out only in the Klang Valley and Seremban on Peninsular Malaysia, sector insiders are confident that it will eventually expand to Sabah.

PRIMA is aimed at those first-time buyers who do not qualify for low-income housing loans, yet still fall into a financing gap when buying a home. While these programmes could create a surge in demand down the road, Shareda’s members have expressed concerns that their costs may be too high to develop housing targeted at low- and middle-income earners.

The upper limit of the price of homes under the MFH scheme has been set at RM220,000 (US$73,714) per unit.

Developers suggest that with labour and materials costs in Sabah so high – Shareda’s vice-president, Chew Sang Hai, recently labelled them the high­est in Malaysia – they will not be able to produce houses to be sold at such low prices.

Given that the MFH houses will be approximately 79-93 square metres in area, the sell­ing price translates to about RM2500 (US$838) per square metre, which is unlikely to be worthwhile for the developers, critics argue.

Shareda would also like the government to amend regula­tions regarding plot set-backs.

According to the association, if the rules were changed, a bet­ter plot ratio could be achieved, which would reduce unit land cost.

At the same time, Shareda has urged banks and other financial institutions to come up with more innovative ways of providing low- and middle-income buyers with the support necessary to enter the housing market.

These are important con­cerns, with the state govern­ment taking them onboard and exploring ways to lower costs and get financial support initia­tives off the ground.

When that happens, the sector will likely witness sharp growth acceleration, as many young Sabahans get their first chance at home ownership.