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Can’t afford a mortgage? Keep calm and Rent-To-Own (RTO) instead

The Rent-To-Own (RTO) scheme is one innovative way developers such as TAHPS are offering  to assist aspiring home buyers.

The Rent-To-Own (RTO) scheme is one innovative way developers such as TAHPS are offering to assist aspiring home buyers. Graphic: REI Mediaction

The RTO concept may just be the win-win home ownership model for both developers and consumers, especially at a time where the property market is correcting itself. Epic Residence is similarly offering buyers just that with its innovative ‘Stay & Own’ scheme.

By Khalil Adis

Let’s face the elephant in the room, shall we? For most aspiring home owners out there, obtaining a loan in the current economic condition seems like a  Mission Impossible.

“When you can’t buy, rent instead,” experts say.

However, unbeknown to many Malaysians, there is a third option available – the rent-to-own (RTO) scheme.

Incidentally, this is something that TAHPS is currently rolling out for its Foreston and Epic Residence projects under its ‘Stay & Own’ scheme with the aim of making home ownership an achievable dream for aspiring home buyers.

How does it work? 

Under the ‘Stay & Own’ scheme, buyers will need to sign a tenancy agreement with the developer and then move in.  Photo: Khalil Adis

Under the ‘Stay & Own’ scheme, buyers will need to sign a tenancy agreement with the developer and then move in. Photo: Khalil Adis

The RTO concept operates based on a lease-purchase contract – the duration of which is usually three to five years between a buyer and a developer. The buyer will first rent a property from the developer with an option to purchase at the end of the contract period.

In RTO deals, a certain percentage of the monthly rent paid will be credited to the property’s future purchase. This translates to savings accrued for the property’s down payment.

TAHPS’ ‘Stay & Own’ scheme works in a similar way but with added flexibility. Under the scheme, buyers will first need to sign a tenancy agreement with the developer and then move in.

Upon fulfilling the tenancy agreement, part of the rental will be converted into part of their purchase. Buyers can also sign a Sales and Purchase Agreement (SPA), should they wish to purchase the unit within the tenancy agreement. TAHPS has also given buyers the option to move out once the tenancy agreement expires.

Consumers get the best of both worlds 

You should consider the RTO concept If you are not financially stabile and cannot obtain a housing loan. Graphics: Shutterstock

You should consider the RTO scheme if you are not financially stabile and cannot obtain a housing loan. Graphics: Shutterstock

Considering how housing prices are escalating much faster than income, RTO could be the Holy Grail for fresh graduates and young working adults who are still lacking income stability and the required credit score to obtain a housing loan.

Firstly, RTO allows them to both build a positive credit history and increase their savings before tackling a ‘higher-responsibility’ commitment like mortgage.

Secondly, RTO enables buyers to ‘lock in’ a property’s purchase price today and not have to worry about market fluctuations down the road.

Thirdly, buyers are able to “test drive” a home before deciding on purchasing it for good, as in the case for Foreston and Epic Residence. This works to their advantage as they can get a feel of the property, its neighbourhood, ease of mobility and so on. Once they find that it makes their living experience conducive, they can then make the final purchasing decision.

Developers can have their cake and eat it too

The RTO scheme could be the lifesaver in the current property market to solve the supply overhang issue. Graphics: Shutterstock

The RTO scheme could be the lifesaver in the current property market to solve the supply overhang issue. Graphics: Shutterstock

It’s not only consumers who stand to benefit. Developers will also get a piece of the financial pie too as the RTO concept will significantly increase their pool of potential customers.

Firstly, by giving buyers the option to rent to own, developers will be able to sell off their unsold stocks as well. This could solve the property overhang issue that is currently plaguing our property market and help developers recoup unrealised profits.

According to National Property Information Centre (NAPIC) statistics, the number of unsold residential properties in 2016 saw a year-on-year increase of 29 per cent and 44.7 per cent for homes that are currently under construction and pending construction, respectively.

Secondly, developers can set higher ‘rental’ prices than current market prices when negotiating lease-purchase contracts with buyers in return for allowing purchasers to ‘book’ the property. Should the buyer not take up the option to purchase a property at the end of the contract, the developer will still walk away with the option fee.

Why RTO is the way to go

View of downtown Kuala Lumpur. Government policies and incentives on the RTO scheme may help to solve the current oversupply issue in the property market. Photo: Khalil Adis

View of downtown Kuala Lumpur. Government policies and incentives on the RTO scheme may help to solve the current oversupply issue in the property market. Photo: Khalil Adis

Admittedly, the RTO model will require a few supporting policies to facilitate its effectiveness and sustainability. The government should look to provide incentives to participating developers and establish an official framework to protect the interests of all parties. Ultimately, the RTO concept kills two birds with one stone – addressing the masses’ affordability issue and helping to solve the current property overhang dilemma.

Interested in our ‘Stay & Own’ scheme? Email us at enquiry@tahps.com.my


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