Madani Credits: Solving Affordable Housing Challenges in Malaysia with Market-Based Innovation
Malaysia’s housing policy has long relied on a cross-subsidy model, requiring private developers to build a percentage of price-controlled affordable housing within their projects. While this may have alleviated some of the government’s burden, the model is increasingly seen as financially unsustainable—especially in high-cost urban areas like Kuala Lumpur.
Now, a new idea is emerging: the “Madani Credits” system — a game-changing, market-based mechanism that promises to provide affordable housing without overburdening private developers or distorting the free-market housing supply.
Why the Current Model Isn’t Working
Private developers in Malaysia are mandated to allocate units under Residensi Madani or similar schemes at regulated ceiling prices (ranging between RM42,000 to RM300,000). However, in dense cities like Kuala Lumpur and Johor Bahru, the actual development costs far exceed these capped prices.
For example:
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Residensi Madani developments in KL cost RM388 psf to build, while units are sold for as low as RM214–RM250 psf.
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RMBJ homes in Johor Bahru face a similar mismatch, needing subsidies of up to RM150 psf.
This gap results in massive financial strain, forcing developers to cross-subsidise losses by inflating prices of free-market homes—a strategy that is only viable during market booms and for large-scale projects.
The Rising Viability of State-Based Alternatives
States like Penang and Selangor have reformed their affordable housing policies:
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Penang’s New Talent Homes revised selling prices upward to exceed development costs.
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Rumah Selangorku 3.0 standardized its pricing to RM255 psf—higher than the actual development cost.
These models are more sustainable but are not yet the national standard. Meanwhile, in KL, the Residensi Madani policy still imposes quotas on each site, regardless of scale, location, or market feasibility.
Introducing the Madani Credits System
The Madani Credits system proposes a shift from rigid quotas to a centralised, credit-based funding mechanism.
How it works:
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Developers who do not wish to build Madani units on-site can purchase “Madani Credits,” priced at 3%–4% of their free-market project’s GDV.
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These credits are pooled into a central fund used to compensate landowners and fund large-scale, centralised Residensi Madani projects.
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The affordable units are then built by dedicated “Madani builders”—specialist contractors who can deliver mass housing efficiently on low-cost, fully-compensated land.
This creates a “tripartite win-win” between developers, landowners, and affordable housing builders.
Benefits of the Madani Credits System
1. Developers Unlock Land Value
By contributing credits instead of building low-cost units on-site, developers can fully utilize their land for market-driven projects, ensuring better profitability and housing diversity.
2. Landowners Receive Fair Compensation
Instead of being forced to sell land below market value for affordable housing, landowners are compensated via the Madani Credit fund, encouraging cooperation and strategic site selection.
3. “Madani Builders” Lower Construction Costs
Centralised affordable housing developments benefit from economies of scale, lower land costs, and better planning for transport and amenities—ensuring lower per-unit development costs and higher liveability.
Can It Be Green? Turning Madani Credits into Carbon Credits
Here’s where things get even more interesting.
The Madani Credits concept can be aligned with carbon offsetting. By integrating:
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Green materials
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Energy-efficient building designs
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Sustainable construction methods
…affordable housing developments can generate carbon offset credits, similar to the Retrofit Credits model in the UK.
These credits can then be sold to organisations looking to offset their carbon footprints, unlocking new streams of funding and making green affordable housing financially attractive and environmentally impactful.
A Practical and Scalable Alternative
With over 134,000 units across 187 new launches in KL between 2025 and 2028, a 3%–4% contribution in Madani Credits per project would be enough to fund the development of thousands of affordable units each year—without skewing the pricing of free-market properties.
The system creates a predictable, transparent, and scalable approach that:
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Frees the private sector from unsustainable quotas
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Allows for central planning of amenities, transport, and services
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Ensures fairness and market alignment in land use
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Incentivizes green construction methods
Final Thoughts: Building Equity Through Innovation
The proposed Madani Credits system is more than a housing policy—it’s a strategic tool for sustainable urban development. By replacing outdated quota systems with an equitable, incentive-driven model, Malaysia can better serve its B40 and M40 groups without derailing property market growth.
For policymakers, developers, and civic planners, this is the moment to embrace new mechanisms that align social, economic, and environmental goals.
