PETALING JAYA: An economist has urged the government and private sector to consider developing what he calls “affordable renting schemes” to cater to people who can’t afford to buy houses.

Carmelo Ferlito, a senior fellow with the Institute for Democracy and Economic Affairs, told FMT he believed there was a need to shift the Malaysian focus from house ownership to the provision of shelter.

This would reduce financial risks, particularly for people with low incomes, he added.

“Even with support and subsidies, someone who earns less than RM3,000 a month will be in a fragile financial position if he is obliged to pay a 20-year loan, for example,” he said.

He pointed out that the emphasis on renting was evident in the boom years following World War II, especially in Europe.

During those years, employers built apartments and rented them out to their workers at affordable rates. This helped develop liveable neighbourhoods and eased commuting woes, Ferlito said.

“This was the case, for example, with Italy during its developing stage in the 1960s and 1970s,” he added.

Carmelo Ferlito.

Asked to comment on the recently announced FundMyHome scheme, Ferlito said: “I think it’s another option in the market. The more options we have the better.”

However, he criticised what he called a “mismarketing of sorts” at the launch of the scheme.

He said the scheme was presented in a way that made it seem as if anyone paying 20% of the property price would be a house owner. This was false, he added.

“Purchasing 20% only gives you the option to buy the house in five years,” he said. “After five years, if you want to fully own the house, you need to fork out the remaining 80%. This did not seem clear during the launch.”

Under the scheme, the 20% is placed in a trust account from which the 5% annual investment return is paid to the participating institutions for five years. The remaining 80% is contributed by participating banks.

There is no monthly repayment for the first five years. After that, a buyer can sell the house or pay for the remaining portion at market price or refinance the property entirely.

Ferlito would not comment on the scheme’s viability or its likely impact on the housing sector. He pointed out that the government was expected to clarify the framework surrounding the scheme soon.

“Let’s wait for the government to update us with the updated regulations,” he said.