REHDA: Full block or two Madani housing within projects will increase prices

REHDA: Full block or two Madani housing within projects will increase prices

When a developer buys a piece of land and their gross development value (GDV) is around 10 times of the land price, the price they want to sell will be adjusted based on the size, the number of units, the type of properties etc. The bigger units they build, the fewer units will be built and the more expensive the units would be. The smaller the unit size, then more units could be built and in fact the prices tend to be lower because the GDV is now divided by a larger number of units. Let me explain.

If the developer can build 100 units of 24 x 65 sq ft sized landed terrace, they can sell at RM1 million per unit. This gives them RM100 million. If they like to make the price lower, they just need to adjust the width from 24 ft to 20 ft. This will allow another new unit to be built every 5 units. In other words, instead of 100 units, the developer could now build 120 units. So, if it used to be RM1 million, the price can now be adjusted to RM100 million divided by 120 units and the price is now at RM833,333.

Article in nst.com.my. Rehda president Datuk Ir Ho Hon Sang said, “In Kuala Lumpur for example, developers need to provide 20 per cent Madani housing for developments above five acres, reaffirmed in the Garis Panduan Perancangan Residensi Madani Kuala Lumpur launched by the Minister of Federal Territories.”

“The selling prices of these units range between RM150,000 to RM200,000 and the sizes are set at 700 square feet (sq ft), 750 sq ft and 800 sq ft,” he said.

Ho said developers have no choice but to opt using the cross-subsidy method in order to fulfil the affordable housing requirement, essentially raising the price of free market housing to keep the price of affordable housing low, below the cost of construction.

“The suggested requirement, whereby a full block or two need to be made into Madani housing instead of a set percentage, will naturally cause a further increase in the free market prices for those who are not eligible for affordable housing,” Ho said. Please read the full article here: Article in nst.com.my.

ONLY BUILD if there’s a market for it

Frankly, when it comes to affordable properties, do NOT build until we have buyers for them yeah. The reason is very simple. This property type is aimed at a specific group and other groups are either not qualified or the group which is supposed to buy is not interested. This is why we have so many overhang units which are under this affordable category. As for doing the research, the government may have to take this up yeah. If we ask the property developers to do, they may not do it wholeheartedly since these affordable units are not profitable for them to build.

Everyone loses when the units are built and no buyers!

If we push developers to build but no one buys them at the end, it will just harm even the existing buyers of other units because the developers would have included the cost of these units into the price of other units to cross subsidise and thus prices for others have gone up and yet these affordable units remain unsold and the money spent to build them has been wasted. This is why until today I do not understand why we cannot just know the demand before we build these affordable units. Hopefully the housing minister is very serious in solving this issue. Simply pushing for a higher number of affordable unit does not solve anything yeah.

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