Bank Negara Malaysia announces today the establishment of the Special Scheme for Low and Medium Cost Houses. Bank Negara Malaysia will provide funding facility amounting to RM1 billion under the Scheme for the construction of affordable houses costing RM150,000 and below. The establishment of the Scheme is part of the ongoing process in ensuring the availability of affordable houses to meet the needs of the low and middle income groups given the current economic and financial environment and tight monetary stance of Bank Negara Malaysia. (Details of the Scheme is as per attached).

In addition to the above facility, Syarikat Perumahan Negara will make available funds amounting to RM1 billion.

Unlike previous schemes, financing facility obtained under the Scheme is widened to provide financing for the construction of houses costing RM150,000 and below. This is in view of the shortage in supply of medium cost houses coupled with strong demand from the low and middle income groups. In addition, as per capita income has progressively risen over the last decade, there has been a greater need for improved standards of accomodation. The demand for the very low cost houses have been largely met due to past emphasis on provision of finance exclusively to promote construction of houses costing RM25,000 and below. These factors have resulted in substantially small number in the shortfall for the very low cost houses. Notwithstanding this, developers are required to continue building low cost houses to meet the needs of the poorest sections of the population.

Under the Scheme, housing developers will be able to get financing at a maximum rate of 10% per annum. The facility will be made available for the construction of houses only in areas where there is high demand for these houses and where supply remains short.

Bank Negara Malaysia wishes to emphasise that credit targets of 15% as announced earlier will remain unchanged. The extension of this facility should not be deemed expansionary on the monetary aggregates. Currently, the annual rate of loan growth of the banking system stood at 17%. Bank Negara Malaysia will ensure that loan growth in the banking system moderates to be consistent with the expected rate of inflation and the capacity for the economy to expand under the prevailing economic conditions. Hence, the efforts will be undertaken to ensure that provision of funding to meet the socio-economic objectives would not be compromised on the need to maintain tight monetary policy. The latter will ensure positive real rate of return on ringgit investments in order to maintain exchange rate stability.

Bank Negara Malaysia
27 April 1998

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