MALAYSIAN Real Estate Investment Trusts (M-REITs) are professionally managed trusts that own and manage some of the largest and most iconic landmark assets in Malaysia, including many malls, hotels, offices, education assets, hospitals, industrial facilities and warehouses across the country.
As a key contributor to the real estate landscape and the national economy, M-REITs are increasingly committed to corporate social responsibility (CSR) and environmental, social and governance (ESG) initiatives to uplift the community, society and country.
This includes exploring social impact investment initiatives such as the proposed Affordable Rental Homes (ARH) programme on wakaf land which will benefit the bottom 40 (B40) households in Malaysia and provide long-term, sustainable solutions for wakaf trustees and the government.
With the proposed ARH on wakaf land, M-REITs present a mutually beneficial proposal for all stakeholders. Wakaf plots of land are endowments made by Muslims to a religious, educational or charitable cause, bequeathed for the benefit of the community.
To begin, M-REITs will lease suitable vacant or undeveloped wakaf land from the respective wakaf trustees to develop the affordable rental homes, which will help to unlock the value of these lands to benefit B40 households.
Upon leasing the land, M-REITs will finance and build the ARH, with family-sized living spaces, facilities and amenities. All development costs will be fully borne by M-REITs, relieving the government of significant upfront cost burdens in developing affordable homes.
This is in contrast to current programmes such as Projek Perumahan Rakyat (PPR) which incurs development costs of RM160,000 to RM200,000 per unit, resulting in losses of RM125,000 to RM160,000 per unit when sold at subsidised prices on top of any management and maintenance costs incurred by the government.
This is also compared to other built-for-sale affordable home programmes such as Perumahan Rakyat 1Malaysia (PR1MA) which suffers from high rates of unsold units due to the high prices of RM200,000 and above which are unaffordable to B40 households, despite high upfront development costs and subsidies of 20%-30% of property costs incurred by the government.
Proposed affordable
Instead, with the proposed ARH programme, the government can lease the affordable rental homes from M-REITs to be readily sub-tenanted to eligible B40 households to be selected by the government.
This allows B40 households to be able to rent at affordable rates without having to endure the risk and uncertainties of the typical three-year development period for their homes, and without having to take on difficult long-term loan burdens and commitments until they are financially ready.
Furthermore, M-REITs will be in charge of professionally managing and maintaining the ARH to ensure a safe and healthy living environment, while also helping to relieve the current burden of the government totalling RM100mil per year on average in maintaining social housing across the country.
Compared to existing built-for-sale affordable homes which will no longer be in the inventory and control of the government once sold, the government will enjoy the option to purchase the ARH at cost from M-REITs at any time during the lease period, either to be continued to be tenanted as part of a sustainable long-term supply of affordable rental homes, or to be sold by the government in the form of a private lease arrangement to existing tenants as part of a rent-to-own programme to encourage long-term savings, or a combination of both.
At the end of the land-lease period, the wakaf land, along with any structures or buildings on the land, will also be returned to the respective wakaf trustees, either to be renewed for future generations of ARH or repurposed and reutilised for the continued good of society.
With the availability of currently vacant and undeveloped wakaf land across the country, the proposed ARH model is highly scalable and can sustainably benefit B40 households in various states without depleting government landbanks or the pressure of acquiring new landbanks.
Moreover, as an additional feature of the programme, the government may also consider implementing the Contribution-in-Lieu (CIL) Fund to further subsidise the rental rates for B40 households with contributions from private developers in-lieu of affordable housing development quotas as initiated and endorsed by the Real Estate and Housing Developers Association (Rehda) Malaysia.
All in all, the proposed Affordable Rental Homes (ARH) programme is a transformative social impact investment initiative proposed by M-REITs in line with the United Nations Sustainable Development Goals (UNSDG), specifically SDG 1 (No Poverty), SDG 10 (Reduced Inequalities), SDG 11 (Sustainable Cities and Communities) and SDG 17 (Partnerships for the Goals), as a long-term complementary solution to affordable housing in Malaysia, innovating and building upon the foundations and track record of successful commercial and residential developments on wakaf land, such as Menara Imarah and Menara Bank Islam along Jalan Perak, the housing project development by Bank Islam, Penang Islamic Religious Council and UDA Holdings in Penang, as well as built-for-sale affordable homes by Perak Islamic Economy Development Corp.
As the saying goes, “Sustainable investing is the best long-term policy”, the proposed ARH programme will be a pioneering step and a giant leap in nation-building.
While not all M-REITs may be able to partake in this initiative, the interested M-REITs look forward to engaging with wakaf trustees as the land owner, and the government as the potential master lessee, whose support will be key in realising this programme.
Ultimately, while the proposed ARH may not be able to solve affordable housing overnight, it is hoped that the model would lead to a novel solution to address this long-standing issue.
Datuk Jeffrey Ng is the immediate past chairman of the Malaysian REIT Managers Association and CEO of Sunway REIT Management Sdn Bhd. The views expressed here are his own.