March 17, 2011

My First Home Scheme breakdown : Choose your first property carefully

A few days ago, on 8th March 2011, after announcing it in Bajet 2011 in October 2010, Malaysia's Prime Minister, Dato' Seri Najib Tun Razak finally announced the mechanism for the First Home Scheme (Skim Rumah Pertama) in Malaysia. Malaysia is not the first country to have a First Home Scheme as a few other countries like Australia also has the same scheme for its citizen.

A few days, there was an announcement from the Housing and Local Government Minister, Datuk Chor Chee Heung, that they will amend the Housing Development (Control & Licensing) Act 1966 to ensure housing developer will be more accountable. This was said during the launch of SP Setia Berhad's smartphone application. According to the news report, which you can read here, he was to have said first time buyer to not be too choosy when buying their first property. That seems to be a contradiction from his first statement.

As announced by the Prime Minister, let us look at the breakdown on how does one get to be a part of this scheme :

1) You must be below 35 years old and never own a house before;

2) Your household income (combined income if you are married) must not exceed RM3,000.00;

3) You don't need to come up with the ten percent down-payment of the house which you want to purchase. This 10% will be guaranteed by Cagamas Berhad;

4) The price for the property must be below RM220,000.00. Some news report has put the amount to be between the price of RM100,000.00 and RM220,000.00;

5) Currently, a stamp duty discount of 50% is already being enjoyed through a stamp duty exemption given on any instrument of transfer and loan agreement instruments for houses priced not more than RM350,000.00. This means that the exemption of 50% will also be enjoyed by those who do not participate in the First Home Scheme. The exemption is given under Stamp Duty (Remission) (No. 3) Order 2010. The Valuation and Property Services Department has set the mechanism for one to get the exemption, they must give an undertaking through a statutory declaration which specifically said they have bought a property costing not more than RM350,000.00. This 50% discount applies for any Sale & Purchase Agreement executed between 1st January 2011 and 31 December 2012;

6) All the matters regarding the application to get the 100% loan (including the 10% downpayment for the property guaranteed by Cagamas Berhad) is handled by the few banks which has been appointed by the government as the financiers for the First Home Scheme. Some of the banks are Alliance Bank, Standard Chartered As-Saadiq, CIMB Islamic Bank, AmBank Berhad and Maybank Berhad. These banks should have a product which relates to the First Home Scheme;

The mechanism for buying a property under this First Home Scheme is stated below :

1) Go look for the property and pay a booking fee to a housing developer of your choice. Make sure you choose a reputable developer if you are buying it from a housing developer and if you are buying it from another individual, make sure you have check thoroughly the property;

2) Inform the vendor that you are going to apply for the First Home Scheme;

3) Choose the bank which participate in the First Home Scheme and apply for the loan. You must proof to the bank of your eligibility to apply under the scheme. Supply them with your proof of income and information about the property you are buying;
4) When your loan have been approved, appoint a lawyer to handle the transactions with regard to your Sale & Purchase Agreement and loan agreements which will prepare all the undertakings for the First Home Scheme;

5) Monitor the progress of your property and your loan (including the repayment)

Basically, this news is good for the young working adult in the whole country but you will be hard-pressed to find any house at the price of below of RM220,000-00 within the city areas. It may even be a way for the government to move the concentration of people populating city centers. However, this will only bring another question : When will the issue of connectivity be resolved? Here's hoping to the MRT project is one of the answer.

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