Building Affordable Houses

Beautiful House

Viewing the prices of the newly launched houses, it confirms the fear of the middle class in Malaysia. The prices of homes are in fact beyond the reach of the majority of the population. The worry is worsen by the lack of effort by the government and its agencies.

In order to understand the drivers that pushed the prices up, it is worth to review the cost contents of the housing development. The following are the major cost elements:

a. Land Cost
Twenty years ago, the cost of land constitutes to about 10% of the project cost. Now the cost is reaching to 30%. The basic reason is land scarcity. It use to cost about RM10 per sq foot, now the same plot can cost up to RM300 per sq ft. It is expected that the land price to continue to increase.

b. Holding Cost
The approval of a project can easily take 3 years to complete. The main delay is the waiting for the approval from the different agencies. The longer the waiting the higher is the cost.

c. Unsold Units
It may come to be a surprise to many that there are still 1000 of units uncompleted or unsold. Driving around  in the town of Nilai or Salak Tinggi, near the KL international airport, there are uncompleted units and unsold unit. The worse is the situation in Bukit Beruntung, where more than half were abandoned projects. Simple logic tells us that the developers were losing millions. They have to make up somewhere else.

d. Building Material
The average price of material are on the rise. Cement and sand are more than double in the last 10 years. The developers will certain have to pass the price to the customers.

The effort to building affordable houses will certainly require commitment from the main players, especially the government. It is wrong for government to consider itself as a business partner, the government should be the custodian of the citizen.