by Jenny Wong 
By Syakirah Nor – April 2, 2025 @ 7:47am
KUALA LUMPUR: Affordable housing remains a critical challenge in Malaysia, particularly for the B40 and M40 income groups. Homeownership is increasingly difficult for these groups.
Experts note that the real cost of affordable housing includes not just construction but also economic pressures on developers and financial constraints on buyers.
Finding a middle ground requires innovative construction, government incentives, and a broad economic understanding.
The government has introduced programmes like PR1MA and Rumah Selangorku. However, demand still exceeds supply. In urban areas like the Klang Valley, there are 1,000 to 6,000 applicants per unit.
This imbalance necessitates examining the root causes of the affordability crisis and bridging the gap between developers and buyers.
Chief commercial officer and property valuer Chai Wai Seen explains that multiple factors contribute to the rising costs of affordable housing, primarily stemming from various development expenses.
“There are many components in the costs of developing a property development project, including land cost, construction costs, compliance costs, consultant fees, and financing costs.”
“After Covid-19, there was a significant increase in construction costs due to inflation, disruption in the global supply chain, and depreciation of the Malaysian ringgit,” he added.
These cost pressures have a twofold impact where, on one side, developers face squeezed profit margins.
“Developers’ margins were affected when the development costs increased and the competitive market situation restricted price hikes for condominiums and serviced apartments,” he said.
On the other side, increasing construction and living costs mean that the target market—primarily the B40 and M40 segments—is hit hard, diminishing their purchasing power.
Juwai IQI co-founder and group chief executive officer Kashif Ansari said that last year, climbing cement and steel prices raised home construction costs by 5 per cent to 10 per cent.
“These hikes trigger a chain reaction, escalating project expenses and potentially affecting final home prices.”
He further pointed out that although Malaysia benefits from relatively controlled construction costs compared to other ASEAN countries, the intrinsic cost structure—with construction accounting for 50 per cent of new housing expenses—still leaves developers with little margin to manoeuvre.
Strategies for Developers: Balancing Profitability and Affordability
Developers continuously face the challenge of maintaining profitability while delivering affordable housing.
Chai said that in order to maintain profit margins, developers must either increase project revenues or find ways to reduce costs. One viable solution he offered is adopting the industrialised building system (IBS) for mass production of affordable units.
“The government can also reduce compliance costs to assist developers in maintaining profitability,” he remarks, though he concedes that these approaches come with their own challenges.
Meanwhile, Kashif outlined additional strategic measures, stating, “Developers can use government incentives to build more affordably and they can cross-subsidise affordable units with luxury homes as well as adopt innovative construction techniques to manage costs.”
By utilising advanced construction methods—such as modular techniques and prefabrication—the industry could reduce expenses and accelerate project timelines. Kashif compares this approach to an Ikea flat-pack box, symbolising a shift toward more efficient and cost-effective housing production.
Affordability, however, is not solely defined by construction costs. Bank Islam Malaysia chief economist Dr Mohd Afzanizam Abdul Rashid said that the broader economic context plays a pivotal role.
“The principle of cost to build an affordable house would be the same as in the mainstream market,” he explains, noting that when building material costs rise, profit margins shrink.
He emphasises that affordability hinges on purchasing power—not just housing prices. “Income has to increase and the prices of other goods and services should not rise excessively,” he asserts.
Dr Afzanizam also suggests that the promotion of a rental housing market could serve as an interim solution, enabling households to save up before venturing into homeownership.
However, for this approach to succeed, a well-regulated environment must protect both renters and property owners, ensuring that rental rates remain fair and that the upkeep of properties is maintained.
On the policy front, Chai and Kashif advocate for proactive government intervention.
Chai warns of the oversupply of high-rise developments and calls for a study to ensure affordable housing meets its intended targets rather than adding to market saturation.
Kashif proposes concrete measures such as subsidising construction materials, offering discounted financing for affordable housing projects, and forming purchasing consortia to leverage economies of scale—a strategy that could reduce material costs by up to 30 per cent.
References from: Rising costs: A multifaceted challenge
