Youths Will Remain A Debtor!
According to the last census statistics of 2010, there are about 7.2% Indians in Malaysia. Those who are aged 10 to 30 are estimated to be 360,000. Since there are no detailed records to look for the number of Indian graduates in Malaysia, we assume that, there are approximately about 1,000 Indian youths graduating from universities or private colleges. Though the age factor varies from all this 1,000 graduates, for simple understanding and purposes, we assume these graduates are employed immediately after completing their degree and earning an average of RM3, 000 per month at the age of 24.
Hold on! Why are we making all these assumptions? We just want to paint a picture in the reader’s mind about the challenges faced by the Indian youths in owning their first house. The financial challenges faced by these youths are tremendous and may shock you if you never calculated in this way.
What is the most common expectation of a young graduate after completing the studies? Obviously it will be a vehicle to commute to work and a comfortable house to settle down. Bear in mind that, not all graduates earning RM3, 000 per month. Their salary varies according to state. Therefore, they are forced to migrate to Klang valley or big cities for a better future. In our study, we are taking Klang valley as a sample. These graduates, who migrate from small town around Malaysia are forced rent a house or room near to their workplace. While, their dream to own a house to enjoy freedom and spend their hard earned money for their future is completely normal.
When we look into the prices of the houses in Klang Valley (apartments and condominiums excluded), it may shock you. A single story house in Petaling Jaya, Kuala Lumpur and its surroundings area is priced on average at RM300, 000. Double story house prices are starting at RM500,000. Since we got the numbers now, let’s make a detailed calculation on this. Summarised situation, 24 year old young graduates earning RM3, 000 a month planning to buy an ordinary single story house at RM300,00.
The first thing we need to look into is the down payment. According to Malaysian regulations, it is required to pay about 10% as a down payment for the house which amounts to RM30, 000. Which means, if the graduate keeps all the money without spending a dime (including food), he will require 10 months to raise the money for down payment. Since that is not possible, assuming he can save RM1, 000 per month, he will require 30 months or 2.5 years to raise it. Do take note that is excluding the legal charges. Based on this house, the legal fee will be around RM13, 000 in which it means, the total amount required to buy the house will RM43, 000 or 43 months of savings without fail.
If balance of the RM270, 000 will be financed by a bank at the rate of 4.1% interest for 35 years, the monthly instalment will be RM1,220 per month. This means, an average graduate will be spending half of his income and part of his life just to pay house instalments.
If a graduate facing this at their beginning of their career, how about those Indian youths who are without a degree? What about those who earns less than RM3, 000 per month?