Speaker: Kokularupan Narayanasamy, International Housing Consultant.
With a vulnerable low-income group in the mid-90s, the Malaysian government embarked on a low-cost housing provision scheme setting up quotas for developers, which required them to allocate a certain percentage for low-cost houses. The government established a fixed pricing strategy forcing developers to adopt cross-subsidization on their projects. The Central Bank of Malaysia also played a huge role in financing low-cost housing.
In 1986, the National Mortgage Corporation of Malaysia (also known as Cagamas) was instituted as a liquidity facility to enable commercial banks further to provide long-term loans to borrowers at reasonable rates. Today, Malaysian mortgage financing is 35% of its GDP, with over 15 government housing programs currently active in providing housing in Malaysia, and effective at that.
Considering the housing finance value chain, 4 main blocks constitute housing finance. They include developer finance, mortgage finance, secondary mortgage institution, and the capital market. While the capital market is focused on providing long-term finance to the secondary mortgage institutions, which, in turn, provide funds to the mortgage finance institutions, most commercial banks are wary of offering developer finance. This is mainly due to a need for more trust in developers, particularly those with no track record.
Similar to Cagamas is the Nigeria Mortgage Refinancing Corporation (NMRC), which is saddled with the responsibility of bridging the cost of residential mortgages. Considering Nigeria’s low mortgage penetration, it is necessary to strengthen and reposition the NMRC and other housing institutions, further driving down mortgage rates and making them accessible for both public and private sector workers.