The Penang government will cooperate with Bank Negara to 'narrow the gap' between housing loan applications and the rate of rejections by commercial banks.

It was recently reported that the rate of rejection of loans applied by house buyers is about 70 percent, which makes it difficult for those in the lower income group to own houses.

State executive councillor on housing Jagdeep Singh Deo said his meeting with Bank Negara deputy governor Abu Hasan Alshari Yahaya in Komtar yesterday had 'positive outcomes'.

The meeting was held to appeal to Bank Negara to issue directives to commercial banks to impose less stiffer conditions on housing loan applications, especially for those from the low- and medium-income groups, Jagdeep said.

"One of the factors raised by Bank Negara is that household debt is very high, at 89 percent. It is one of the highest in Asia and we therefore need prudent debt management," Jagdeep told a press conference in Komtar today.

"Also noted was the increasing cost of houses in major cities in the country, including Penang Island, which has increased exponentially compared with salaries, making it seriously unaffordable to own a house," he said.

He noted that the minimum average salary for Penangites is about RM4,900 a month.

He has informed Bank Negara that the state government has policies in place to provide affordable housing, at controlled prices of RM150,000 to RM400,000 on the island and RM150,000 to RM250,000 on the mainland.

Jagdeep has also proposed that the Developers Interest-Bearing Scheme, especially for first-time house buyers, be reintroduced.

Different approaches

He added Bank Negara welcomed the Shared Ownership Scheme by the Penang government, saying the central bank also agreed to consider the different approaches to housing initiated by the state.

Jagdeep said Penang has also requested the reasons for loan rejection to be made known so that cases that can be salvaged can be resolved by his department.

"One of the reasons for rejections of bank loans is that the income ceiling limit for potential house buyers does not meet the criteria. We have asked that the incomes of both husbands and wives be considered as well," Jagdeep said.

"Both parties (Bank Negara and Penang government) came out enlightened about the various housing issues after the meeting.

"As engagement between us is very important, we will organise a joint workshop to discuss these issue further," Jagdeep said.

The proposed workshop is planned for the first week of December.