City & Country: State open to holding joint public auctions with banks on low-cost units

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THE STATE is open to meeting with bankers to conduct joint public auctions on foreclosed units that fall into the low and low-medium-cost (LC and LMC) category.

Penang Housing, Town and Country Planning Committee chairman Jagdeep Singh Deo tells City & Country  on the sidelines of a public talk at the Penang International Property Expo 2015 that the state is happy to increase the supply of affordable homes through the auctioned units.

“This is what I propose to the banks as a solution to the auction of units that were foreclosed due to mortgage payment default. The state can always conduct a joint public auction.

“We are happy to increase our pool of affordable homes for those who are eligible. I am sure bidders would be overjoyed to get a unit at a cheaper rate, although it is not newly built.

“It would add more options to our waiting list, which has about 23,000 applicants,” he says, adding that he was recently approached by a Public Bank official to look into the public auction of such units.

Among the issues that would be discussed with the bankers through the Association of Banks in Malaysia are legality matters as the High Court issues the order for properties to be auctioned, Jagdeep says.

According to Penang Auctioneers Association (PAA) chairman Stephen Soon, more than 40% of LC and LMC houses auctioned are not sold due to the state’s stringent criteria on first-time homebuyers.

Those who are not first-time homebuyers and do not fall into the RM10,000 household income bracket cannot purchase at auctions, he says.

The unauctioned units then see a drop in reserve price and dim chances of recovering the principal amount. Often, the original homebuyer who defaulted on the mortgage ends up facing bankruptcy charges.

Soon says the association will submit a proposal to the state to consider lifting or relaxing the criteria on bidders who are interested in purchasing auctioned LC and LMC units to save defaulting parties from bankruptcy.

When asked to comment on the proposal, Jagdeep says changing the criteria is not an option as it would lead to abuse by property speculators who would purchase the units to sell or rent them at higher prices.

“We cannot allow that to happen because it would lead to purchases by unscrupulous property buyers.

“We cannot deprive those who deserve the units,” Jagdeep says at a press conference to announce a donation raised for the East Coast flood victims during the Penang International Property Summit 2015.

According to Penang’s first-time homebuyer eligibility rules, applicants of LC and LMC houses must have a joint household income of between RM2,500 and RM6,000 for units costing between RM42,500 and RM200,000, respectively.

The state government will be building 22,545 affordable homes in 12 projects in all five districts, while the private sector has submitted planning permissions to the Penang Island Municipal Council to develop 9,858 units, Jagdeep says.

PAA’s Soon reveals that a majority of the 500 properties auctioned by the banks comprised LC and LMC units with reserve prices as low as RM6,000 and situated mostly on the mainland.

He observes that in an auction to be held between Jan 12 and March 4, 46% or 76 out of 164 properties are LC and LMC units with a total reserve price of about RM3.62 million.

Meanwhile, Jagdeep says some RM65,175 was collected from the public and exhibitors during the three-day summit.

“This fund will be directed to the East Coast flood-stricken states through the state treasury to assist in their rebuilding efforts.”

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This article first appeared in City & Country, The Edge Malaysia Weekly, on January 19 - 25 , 2015.