• The Housing and Local Government Ministry (KPKT) is mulling offering Madani Deposit, which could provide up to RM30,000 financial assistance for first-time homebuyers in the 2025 Budget.

• The proposed initiative is aimed at easing monthly payment commitments for firsttime homebuyers, particularly the youth in the B40 and M40 income groups, and aligns with the ministry's aspiration of ensuring every citizen owns a home.

• We maintain an Overweight recommendation on the property sector, given the potential effects of increased property sales, improved affordability, and the facilitation of financial assistance, which may foster consumer confidence and enhance buying power.

Madani Deposit Initiatives - Boosting Property Sales and Shifting Developers’ Focus

On 21st Aug 2024, the Housing and Local Government Ministry (KPKT) submitted 33 proposals totaling nearly RM1bn for the 2025 Budget, including the Madani Deposit. This initiative will offer up to RM30,000 in financial assistance to first-time homebuyers. We believe this initiative to have a significant impact on the property market as this will boost property sales, especially in the affordable housing sector. We anticipate a potential shift in developers' focus towards building more affordable homes to capitalize on the increased demand from first-time buyers like the join venture project between Lagenda and Sime Darby Property which is “Seed Home Lagenda” – an affordable township development in Gurun, Kedah. The proposal also incorporates the establishment of escrow accounts, which could elevate the standing of the development industry by mitigating the incidence of abandoned projects and fraudulent activities.

Increase Affordability and Purchasing Power

With financial assistance of up to RM30,000, we expect an increase in demand from firsttime homebuyers, particularly those in the B40 and M40 income brackets, making homeownership a more achievable goal. Buyers are likely to have greater confidence in purchasing properties, knowing that their payments are protected, and that there are measures in place to prevent project abandonment. With developers potentially increasing their focus on affordable housing, buyers may have a broader range of options to choose from. Lagenda Properties, a leading developer in the affordable residential sector, has taken this trend a step further by offering double-storey homes in Mersing, Johor, at budget-friendly prices.

Encourage Competitive Loan Product

Financial institutions could see an expansion in their home loan market as more first-time buyers become eligible for loans, leading to increased business opportunities. The introduction of escrow accounts will mitigate the risk of lending for projects that may be abandoned, thereby reducing the likelihood of non-performing loans. Institutions that adapt quickly to the new regulatory environment and offer competitive loan products could gain a competitive advantage in the market. Increased demand, coupled with a potential increase in supply of affordable homes, may lead to price stability or even moderate price increases in certain segments. The property market is likely to benefit from stronger regulatory measures, which will enhance market integrity and reduce the incidence of fraud and abandoned projects.

Maintain Overweight on the Property Sector

We anticipate that the property market is poised to strengthen in 2025 due to various significant factors, such as 1) the potential of increase affordability, 2) a more financial assistance initiative, and 3) increase in disposable income which can lead to more excitement in the property market activities. The Madani Deposit initiative and related proposals in the 2025 Budget are aimed at making homeownership more accessible, revitalizing the property market, and ensuring a more robust and transparent development industry.

We favour developers with strong sales history, reputable brands, substantial land holdings in desirable locations, and minimal holding costs. We maintain a BUY call on Mahsing (TP: RM2.07), Matrix (TP: RM1.99), Lagenda (TP: RM1.48) and Simeprop (TP: U/R).

Source: BIMB Securities Research - 22 Aug 2024