They said the practice has inflated open‑market prices, pushing home ownership increasingly beyond the reach of Malaysians in the M40 segment, the country’s middle‑income group.
Earlier this month, the Real Estate and Housing Developers’ Association Malaysia (Rehda) highlighted the issue, saying cross‑subsidisation had contributed to M40 home ownership rates slipping below those of the B40 group recently.
Citing official data, Rehda said M40 home ownership stood at 75.9%, compared with 76.3% among the B40, underscoring concerns that current housing policies have left middle‑income households less able to afford a home.
M40 policy blind spot
Siva Shanker of Rahim and Co International Property Consultants said the sharpest pressure point in the housing market is no longer at the bottom, but in the middle — where M40 households are being increasingly locked out by eligibility rules and pricing structures.
He said current income classifications fail to reflect the cost of living in major urban centres, leaving many in the middle-income segment both unable to qualify for affordable housing and priced out of the open market.
Siva said the mismatch explains why the M40’s home ownership rate has slipped below the B40.
He suggested 100% financing and stepped repayment schedules, or those that rise in line with income, to help ease first-time M40 buyers into the property market.
Buyer costs ‘priced in’
Chang Kim Loong, secretary-general of the National House Buyers Association, said cross-subsidisation occurs because private developers are tasked with building low- and medium-cost housing, a responsibility that rightfully belongs to the government.
“When private developers are forced to build social housing, the losses will be passed on to buyers of the open portion of the project. Private developers are not here to do charity for the government,” he said.
Chang said other policy distortions have also pushed open-market home prices higher. He cited directives concerning the release of unsold Bumiputera quota units and the cost of building “last‑mile” utilities as contributors to higher prices.
“These costs are definitely passed on to house buyers,” he said, adding that corporatised utility companies should instead bear their infrastructure costs.
Chang also called for first-time M40 buyers to be given upfront relief. He said measures such as 100% financing, stamp duty exemptions and tax deductions on housing loan interest would have an immediate and positive impact on housing affordability.
Systemic cost pressures
Azree Othuman Mydin, dean of Universiti Sains Malaysia’s school of housing, building and planning, said cross-subsidisation contributes to higher prices but cautioned against treating it as the sole cause of the affordability crisis.
He said higher compliance costs, land supply restrictions and financing constraints were equally significant factors. The issue is systemic, he added.
“When any one party carries a disproportionate burden, the system becomes fragile, leading to delays, financial strain and abandoned projects,” said Azree.
However, he said imposing additional costs on foreign buyers — such as higher stamp duties — would do little to improve affordability for local M40 households, since foreigners account for only a small share of the market.
No quick fix
All three experts agreed on the necessity for coordinated policy reforms, faster approvals, revised price bands, and financing models that better reflect income growth to improve housing affordability for middle-income Malaysians.
Siva said immediate action is needed.
“We have been talking about affordable housing for more than 15 years but the same problems remain,” he noted.