THIS is set to be a milestone year for Perbadanan PR1MA Malaysia. The government agency tasked with building affordable housing is set to deliver another 8,500 homes by year-end, bringing the total completed units to 17,000 in two years. PR1MA also recently rolled out a special end-financing scheme to help fill the funding gap faced by many of its homebuyers.

This is the culmination of a difficult four-year journey thus far and there has never been a more crucial time to help the rakyat to own homes.

Malaysia’s property market has been marred by a severe structural mismatch — an ample supply of high-end homes that most cannot afford. Conversely, there has long been a lack of affordably priced homes for the middle-income group, which, by the government’s definition, earns monthly incomes of between RM3,860 and RM8,319. Recent years have also seen credit tightening in a bid to cool down the property market.

What’s more, the young and the middle-income group make up a substantial portion of the electorate. Most of them are grappling with the rising cost of living, especially in the urban areas, crushing debt obligations and not being able to own homes. Needless to say, bread-and-butter issues dominate public discussion, especially when the 14th general election is said to be around the corner.

What is clear is that the government had anticipated the problem, which led to Prime Minister Datuk Seri Najib Razak launching PR1MA in July 2011 amid much fanfare. It was the brainchild of the late Tan Sri Jamaluddin Jarjis, a former federal minister and Malaysia’s envoy to the US, to help the “sandwiched” group to buy properties.

“There were no specific programmes to address this basic need of the middle-income group, the majority of whom were unable to afford a house in the free market in urban areas, but yet were not eligible to apply for the low-cost and community-friendly houses being offered,” Jamaluddin, PR1MA’s founding chairman, said in the organisation’s 2012-2014 annual progress report.

To achieve its end, PR1MA was promised strategic parcels of government land all over the country so that it could work with developers to build affordable houses. The logic was that since the land cost was taken care of and PR1MA was a non-profit developer, its homes would be about 20% to 30% cheaper than market rates. Simply put, PR1MA’s success hinged on the availability of land — government land to be specific.

Barely two years into PR1MA’s establishment, Jamaluddin, a close confidant of the prime minister, died in a helicopter crash, leaving the government agency without a strong advocate in the halls of Putrajaya.

So, PR1MA had to soldier on and find its own way to deliver on its massive mandate.

A lot of the burden fell on the shoulders of PR1MA CEO Datuk Abdul Mutalib Alias, who was an investment banker with Chase Manhattan Bank for 15 years before joining the public service as a special officer to federal ministers, including Jamaluddin.

Mutalib is PR1MA’s employee No 1, tasked with setting up everything from scratch in 2011. He had one government employee seconded to him and next came PR1MA chief operating officer Datuk Dr Aminuddin Abdul Manaf, a seasoned architect and interior design consultant.

Few know that in the early days, PR1MA’s founding team of about 20 used to operate out of a small windowless office that was meant for seven people.

“Three rooms, no windows and one small meeting room. The CEO’s room sometimes turned into a meeting room. When they wanted to have a meeting, I had to go down for coffee. HR operated from the pantry,” Mutalib recalls with a chuckle during an interview with The Edge.

PR1MA’s engines really only started two years after its launch, after its board was appointed in March 2013. Back then, the big PR1MA promise was to deliver 500,000 affordable homes over five years. But reality set in and the timeline is now longer.

To date, PR1MA has secured board approval for 260,188 units, of which 132,352 were under construction as at January. The first batch of PR1MA homeowners only got their keys last year.

PR1MA completed 8,500 homes last year and intends to finish another 8,500 by year-end, bringing its total delivery to 17,000. It is still a long way from its mandate of delivering 500,000 homes.

“We should see the delivery numbers go up incrementally. And we’re doing it with 300 employees. It requires a lot of new thinking. If we waited for the land bank and 2,000 employees, we’d never start lah! Think inside the box, then think outside the box,” Mutalib says.

He concedes that PR1MA got off to a slow start because of the many challenges it faced.

For one, most of its earlier projects were high-rises, which take about three years to complete, a longer time than for landed homes. This is why Mutalib made it a point for PR1MA to strike a balance between landed homes and high-rises in its portfolio.

But the key and toughest challenge for PR1MA has been a lack of land bank to work with. In order to deliver 500,000 homes, PR1MA estimates that it would need about 12,500 acres based on a plot ratio assumption of 40 units per acre. “We were hoping in the early days to get some government land. We negotiated with various government agencies and stakeholders. We did not get the land that we identified because most of it was earmarked for other developments.

“I can understand why they didn’t want to release the land — simply because they had earmarked the land for their own purpose, so we had to respect that,” Mutalib says matter-of-factly.

PR1MA ended up getting only about 108 acres, of which just 39 acres were suitable for development. “Can you imagine that? With the mandate we were given?” Mutalib quips.

This prompted the agency to change its strategy and strive to work with private developers. The response was not overwhelming (see story next page).

“It’s hard to tell developers you must work with PR1MA. Providing affordable housing is the government’s job. Some saw PR1MA as competing with private developers in a market that was already getting crowded,” says a property sector observer who has tracked PR1MA’s journey.

PR1MA has been criticised for failing to address the key structural issues plaguing Malaysia’s unaffordable housing crisis and for being a “stop-gap” measure to placate the masses.

But PR1MA’s officials argue that their mandate was never to help put a roof over the heads of the low-income group. That segment is taken care of by existing public housing projects, including Projek Perumahan Rakyat and other state government-led initiatives.

Researchers have also pointed out that Malaysia needs a coordinated policy and regulatory approach to ensure that house prices remain affordable. PR1MA’s mandate, from its point of view, is clear. It is to help the middle-income group access affordable housing that is on a par with products available on the market but at a lower price, which is hardly the same thing as low-cost properties.

PR1MA is, in a sense, a hybrid animal. It is primarily a taxpayer-funded initiative but functions a bit more like a property developer in the conventional sense.

As Mutalib points out, PR1MA is not a subsidy-driven programme but achieves its targeted pricing through rigorous cost management. Its holistic approach seeks to reduce costs along the entire chain of development, from the sourcing of land and construction materials to standardising the designs and adopting more efficient methods of construction. It also scrutinises proposals from private developers to ensure that the projects meet its requirements, particularly location and costing.

Mutalib says the bulk of the funding is derived from the sale of properties. It also has received government grants totalling RM3.9 billion and is in the middle of arranging external financing facilities of about RM5 billion.

“This is just to address the commitments that we have and we will review again. The critical component of funding sources will be sales,” Mutalib explains.

Policy observers say it is inevitable that one day, PR1MA will have to source most of, if not all, its funding instead of relying on the government to fund its initiatives. It cannot count on a lot of financial support from the federal government, whose hands are full from trying to manage revenue pressures and fiscal deficit targets.

“Could PR1MA go the way of Selangor’s PKNS, which also has to do some for-profit projects to fund its social objectives? It is not inconceivable but we have to wait and see what form it takes,” says one policy observer, who is familiar with public housing matters.

Mutalib did allude to this next phase of PR1MA in the agency’s 2014 annual report.

“While PR1MA was introduced and is supported by the Malaysian government, we have taken a long-term view of becoming a self-sufficient entity. We have thus adopted a modus operandi that sees us building PR1MA homes nationwide while generating strong capital funds to promote the sustainability of the project,” he said in the CEO’s reports.

When asked about it, Mutalib would only say that the sustainability of PR1MA is something management thinks about constantly. “We believe that this targeted group needs the government’s assistance.

We created this programme to provide quality homes at below market prices and we are providing them with end-financing solutions. In the longer term, we will also have to ensure the programme is sustainable beyond the initial mandate to grow,” he says.

The bottom line is, PR1MA has to deliver on what it was set up to do and it will still have to find its own way.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.