Like the budgets of previous years, Budget 2022 also has its share of special allocations or incentives to enable middle- and low-income earners to attain their dream of owning a house

Economic analysts, however, are sceptical that this objective will be met owing to the critical impact of the Covid-19 pandemic.

The inability of B40 and M40 householders to buy their own homes has been a long-standing issue despite the various initiatives introduced by the government to address the matter.

The issue, however, is set to grow more serious as data has shown that more than 600,000 households in the M40 group have slipped into the B40 category as a result of the Covid-19 crisis. 

Not eligible yet

Putra Business School economic analyst Associate Prof Dr Ahmed Razman Abdul Latiff expects the homeownership situation to become even more challenging.

"It's a serious matter that (has existed for several years and) has yet to be resolved. The M40 householders who have fallen into the B40 group also need help to buy a house but I'm worried that they may not be eligible yet for the affordable house ownership programmes meant for the B40," he told Bernama.

He said although the government has made the right move by building low-cost houses and facilitating housing loans for the target group, it is still not enough.

This is because those measures are merely short-term in nature to create supply while the real issue that deserves the attention of the government is bank financing which is the main stumbling block to homeownership.

The high interest rates on housing loans charged by banking institutions often deter the target groups from buying a house as they cannot afford the long-term monthly loan repayments.

"I'm sure people are happy with the announcement that more affordable housing units will be built but if they do succeed in getting a loan, the financing cost will end up being higher than the original cost of the house due to the high interest rate.

"Let's say they buy a house priced at RM300,000 and get a loan which has to be repaid over 30 years at an interest rate of six percent. This will work out to a monthly repayment of RM1,798 and at the end of the loan period, they would have paid a total of RM647,514, which is more than double the original price of the house," said Ahmed Razman.

He said this is why alternative financing options that do not involve banks should be made available to people eligible for the purchase of affordably-priced houses.

In Budget 2022, the government has pledged to implement housing projects, with a total value of RM1.5 billion, for the low-income group.

The government will also provide a RM2 billion guarantee to banks via the Housing Credit Guarantee Scheme next year to provide access to financing for gig workers, micro-entrepreneurs and farmers who do not have a fixed income but wish to buy a house.

Islamic financing scheme

The steep interest rates charged by banks provide enough justification for the government to seek alternative financing options to cater to the needs of low-income earners who wish to own a home as existing schemes such as the Youth Housing Scheme, Rent-to-Own programme and Affordable Housing Fund would still require the buyers to seek financing via banks.

Ahmed Razman said as long as the main problem is not addressed, the homeownership issue will continue to prevail and grow more critical in view of the fact that many house owners are finding it difficult to repay their loans as they are burdened by their monthly debt repayments.

He suggested that an alternative house financing product that is more appropriate with the concept of Musharakah Mutanaqisah be introduced to facilitate homeownership among the B40 and M40 groups as it does not involve interest charges.

Musharakah Mutanaqisah is an Islamic financing concept whereby a government or corporate entity and the house buyer will jointly purchase a property. The entity's share of ownership will then be leased to the house buyer for a specific period.

"This method allows people to pay a certain amount first and then pay the rent little by little which will end with them owning the house with no interest payment. The rental rate is determined by the rental index in the area where the house is located and will be renewed after a few years," explained Ahmed Razman.

He said if the buyer defaults on his payments and the government or corporate entity has to sell or auction the house, the agency will split the proceeds from the sale with the owner based on their share of ownership.

Can it be implemented in Malaysia?

According to Ahmed Razman, the Musharakah Mutanaqisah concept should be implemented by a government agency or cooperative that has long-term goals and is not concerned about making huge profits every year.

The concept is not suitable for banks as these financial institutions are profit-oriented and inclined to reducing financial risks to the minimum.

Is this concept feasible for implementation in Malaysia? Ahmed Razman thinks it is, citing the case of Ansar Co-operative Housing Corporation Ltd, a cooperative in Canada that successfully implemented the Musharakah Mutanaqisah concept for its members to enable them to buy their own homes.

"It can be implemented in Malaysia if the people, especially potential homeowners, request the government to provide them with the Musharakah Mutanaqisah facility. Housing developers will have no objections as they will get to sell their houses as usual," he added. - Bernama