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clock 22-02-2019
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Rent-to-Own Schemes, Easier Said Than Done - Developers

A property developer has dismissed the idea of rent-to-own (RTO) schemes as a way to reduce property overhang. Melaka-based developer Anthony Adam Cho said for most developers with a ready supply of unsold homes, RTO schemes were not financially feasible.

The suggestion was made by property consultancy firm Rahim & Co International Sdn Bhd, which said government-led initiatives were not enough to reduce the glut in housing.

With RTO schemes, Cho said, developers would not be able to collect enough from house buyers each month to cover the high costs of the loan taken for the project. "On average, a developer would seek 50% financing for a housing project from the bank, and the interest rates are high - somewhere around 8% and above," he told FMT.

"Banks also want returns on their investments, so if a property is in an un-strategic location and cannot be sold or will not appreciate, there would be no incentive for banks to go in and offer RTO schemes," he said.

Cho said the real issue was the inability of people to afford homes. He attributed this to the disparity between the increase in salaries and cost of living. He said buying property would probably be the least of a person's priorities if he or she was struggling just to survive.

National House Buyers Association secretary-general Chang Kim Loong agreed that affordability was the issue, but added that developers should not be too stubborn in maintaining their selling price.

He also urged developers to consider giving more discounts in addition to the stamp duty exemption given by the government and the 10% discount on properties given during the National Home Ownership Campaign.

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