THE 520 units in phase one of the Batu Kawan affordable housing scheme in Penang is due to be completed by year-end, but more than half of them cannot be sold.

The state government has vetted applications for the units and given the names of more than 1,000 qualified buyers to the developer, Penang Development Corporation for consideration.

But fewer than half of the qualified applicants have managed to secure a loan to buy the units costing more than RM200,000 each, said state housing exco Jagdeep Singh Deo.

“Only 44% of the units were sold; only some 200 people got it, and the rest could not get loans,” he said at a forum organised by Penang Institute on housing issues, challenges and the way forward on Sunday.

The high rejection rate for housing loans has troubled house buyers and developers in recent years since Bank Negara Malaysia (BNM) tightened mortgage requirements and reinforced responsible lending practices to arrest surging household debt.

In 2015, housing loans made up the largest component of household debt at 49%. 

Developers complain that they have units to sell but house buyers are unable to get loans to buy them, even the affordable units.

Real Estate and Housing Developers’ Association (Rehda) said in recent reports that the rejection rate was 60% nationwide because the banks set high standards that made it hard for potential house buyers to get financing. 

In Penang, the government said some 70% of first-time house buyers who applied to the state for affordable housing failed to get loans.

The difficulty in getting a housing loan, Jagdeep said, badly impacted those in the lower-income group, as their financial status did not qualify them for loans even to buy low-cost homes.

“In Penang, we are not concerned with those trying to get loans to buy RM500,000 homes. We are worried about those who can’t get loans for the RM42,000 units,” he said.

In the state, only those who earn less than RM2,500 a month are eligible to buy a RM42,000 low-cost home. 

Chief Minister Lim Guan Eng, who spoke at the opening of the forum, said the state government was even giving  a 20% discount on the RM42,000 homes, and still the applicants failed to secure loans to buy them.

He also called on BNM to tailor its guidelines to assist this group of buyers and to help young professionals and young families looking to buy affordable homes.

Jagdeep said the bank should not have a one-size-fits-all policy for  loan applications.

“You cannot treat a person who takes the bus to go to your bank to ask for a housing loan the same way you treat someone driving a Bentley or Rolls Royce to see you for a loan,” he said.

He said Penang was the first state government to approach the central bank to find a solution to the problem, adding that officials from both sides were in communication to lower the high rejection rate. 

He said there were many ways to consider to address the problem.

“If the applicant does not qualify now, then we can offer counselling to help the person improve his credit rating so he can get the loan later.”

Jagdeep also said banks should take into account the market value of the low-cost units, which cost RM150,000 to built but sold at RM42,000.

“The actual value of the property is higher, so there is already security there. Don’t be so hard on the loan applicant.”

National House Buyers Association honorary secretary-general Chang Kim Loong said the bank was doing the applicant a favour by reject the loan application.

“To me, when the bank rejects your loan, it is telling you that you are not eligible for the money you are asking for. 

“If you ask for a lower loan, you may get it. It all depends on your eligibility,” he said.

Chang, who is also a Subang Jaya municipal councillor, said banks needed proof the applicant had money and assets to offer as collateral.

“You are a fishmonger, let’s say. You have no income tax form but maybe you have many fixed deposits. But so what?

“All banks work on documentation. You have to show proof you have the money. Maybe the bank will allow you a loan based on collateral and the pledge of your FD,” he said.

With many Malaysians taking on part-time work to cope with the rising cost of living these days, banks should also take into account side earnings people earn from trading in a pasar malam, selling nasi lemak or driving Grabcar when evaluating loan applications.

Economist Dr Lim Kim Hwa said that in Malaysia, there was not much difference between a mortgage for an owner-occupied property and a mortgage for property that is an investment.

He said in other countries, the UK for example, those seeking loans for personal housing would be assessed slightly differently from those buying a property as investment or to rent out.

However, Kim Hwa said while the financing model could be the issue, it was not as simple as reversing the policy.

The Penang Institute board of directors member said cities such as   Singapore, Hong Kong, London and Vancouver also faced housing affordability issues despite their different models to address the problem.

“The housing affordability issue is not unique to Malaysia. It is both a global and a local issue.

“Singapore has a very strict anti-speculative policy that has esulted in property prices falling. In Hong Kong, there are levies imposed by the government but the prices continue to go up.

“So it is a very difficult balance that one has to strike in terms of imposing the right level of policies, levies and penalties, or taxation to control speculative activities, while allowing the market to perform,” he said. – May 7, 2017.