Developers of affordable housing may enjoy lower compliance costs by 2019

PETALING JAYA: Developers of affordable housing are expected to see a reduction in their compliance costs by 2019, including for utility, water and telecommunications, if the affordable housing policy is approved by the Cabinet.
Housing and Local Government Minister Zuraida Kamaruddin wants utility companies to construct their own utility base in the housing areas and other agencies their own amenities so that it reduces the cost for developers.
"At the ministerial level, principally, they (the respective ministries) have agreed to take up the costs," she told reporters at the Housing Conference 2018 organised by Rehda Institute today.
Zuraida said her ministry has proposed that prices of affordable houses be capped at RM500,000, depending on the location and the median income of the people in the area, but noted that the units should be bigger at over 850 sq ft, from 650 sq ft previously, with facilities.
Currently, developers bear the cost of constructing the Tenaga Nasional Bhd (TNB) substation in a particular housing area.
She said the states will have to comply with the proposed rule and the Housing and Local Government Ministry will ensure that it is in line with the federal government's policy.
Zuraida said the high cost of houses is a result of the imposition of premiums to land, development cost and compliance cost. Land and compliance cost make up about 25% of the overall cost of the house. The ministry wants to reduce the cost of development for developers so that house prices can be lowered.
"By 2019, the new housing concept will have this cost reduction (if approved). The (compliance) cost will not be imposed on affordable housing developers."
Rehda Institute chairman Datuk Jeffrey Ng Tiong Lip said over the years corporatised public utility companies have loaded the infrastructure costs onto developers, and if they can bear their own infrastructure costs, it is one sure way that development cost will come down.
Rehda Malaysia deputy president Khor Chap Jen opined that private utility companies such as Syarikat Bekalan Air Selangor Sdn Bhd, Indah Water Konsortium Sdn Bhd, TNB and Telekom Malaysia Bhd should not be imposing capital contribution charges on developers as they are already required to lay infrastructure and bring in new customers to utility companies.
"These utility companies should revise their own capital to be recovered via tariff based on consumption or through federal funding from general taxation.
"Similarly, requirements for huge amounts of deposits should be reviewed as such deposits are adversely impacting project cash flow of small, medium and bigger sized developers alike. The impact is especially felt more severely by the bigger player as they undertake projects with bigger gross development value and they may have many ongoing projects at any particular time," said Khor.
He added that these resources could have been productively and efficiently utilised for new investments instead.
"While many are advocating that construction technology such as the Industrialised Building Systems can help reduce cost, input costs which have been on the rise in recent years must also be looked at. Ideally, the overall costs of doing business must be lowered to facilitate the supply of more houses."