Solving the Malaysian property overhang problem within 2 years or less

Since 2014, the property development industry has been in the doldrums, with property overhang in Malaysia hitting a peak of RM19.86 billion in 2018.

Interestingly, Johor reported RM36.75 billion worth of unsold property (including commercial units), which is oddly higher than the entire Malaysian Property overhang value. They likely use different methods of computation, which I will not go through as its not relevant.

However, I think most of the unsold property in Johor is from those crazy china property development companies, so the effect should be pretty contained. Who on earth would ever buy a 1mil condo in JB, that is built on reclaimed land in the outskirts, crazy.

Like most Asian countries, property prices here are extremely elevated due to,


  • Low home deposit rates of 10% or less. Pre-2008 crisis, in western countries, deposits to purchase a house was typically 20-30%.
  • Long loan tenures of 35 years.
  • The Asian predilection towards property due to the ability to leverage up 10X, and the good fortune bestowed upon the previous generation (who bought in urban areas), due to the geometric increase in population density in urban areas over the last 40 years.


This resulted in property in developed countries, selling at prices which indicate yields far below the risk-free rate. Without AirBnB, you are likely getting at best 3-4% yield. Which is utterly insane when Housing Loan is 4.8% and FD at 4.2%.

The key thing to note here is, the desirability of the property is not the problem, it’s the affordability.



Solving the Problem

So, how do we solve this? Well, it’s pretty straightforward. Nothing sells as well as “Greed” and “Hope”. Mix those two in and add a sprinkle of “Financial Engineering”.

Per year, Magnum and Berjaya Toto, sells about RM8 billion worth of lottery tickets. This does not include the illegal lottery sales in Malaysia.

Many of you are likely to be able to guess where i’m going at by now. Now, here is how I would go about it.

  • The government is to create a SPV, that is allowed to sell Lottery Tickets (We won’t call it that, I’ll explain later). Except the prizes are houses.


  • Allow property developers to sell (on consignment) properties they are unable to sell to the company, at cost plus 3%. The value must be at minimum 25% lower than bank valuation prices. For the sake of illustration, let’s say,
    Bank Value: RM1,000,000
    Price paid to developer: RM750,000


  • Make the odds such that it’s a zero-profit venture. And the key thing here is, to declare the value of the property, which will be the prize, at the Bank Valuation. Thus making it, technically, a positive Expected Value bet. Example,Bank Value/Prize: RM1,000,000 house
    Price Paid by SPV to developer: RM750,000
    Value of Tickets Sold: RM760,000 (additional 10k to cover cost)With this structuring, one can now market this as a Positive Expected Value Bet, which no lottery in the world can do.IE, if you think the bank valuation is the right price, you are statistically ensured of making a profit, if you buy enough tickets. Thus, making it a “wise” financial decision.

    If the government wants, they can even add in an escalating odds feature (tied to your IC), where the more tickets you buy, the higher your probability of winning a higher value property.

    And if you won a property, the value of the property is set off against the total value of your ticket purchases, with a cap of zero, removing the escalating odds, unless you start buying more tickets again.

    In addition, for those immensely unlucky individuals who spent tens/hundreds of thousands buying tickets without winning, they are given the option to set off value of the tickets bought, against the value of the house they want to buy directly from the pool.

    Properties won, cannot be sold for a period of 3-5 years.


The problem with the property market, now, is not that people don’t want to buy property. They can’t afford to buy it, and/or they don’t want to be tied down with a 30-year loan.

With this, suddenly it’s buying a house is not about getting bogged down with a 30-year loan. But to buy RM100 worth of tickets a month. Which turns it from “serious” money into “fun” money. And there is a lot more of the money in the fun category.

And if the marketing is done properly,


  • Strong Emphasis on the positive EV of the bet across all the local newspapers and online news portals.


  • EVERY win is splayed across the newspaper or online news portal with happy reactions from the winners etc.


I don’t see why it would not be possible to sell at minimum RM10 billion worth of houses in a year. Especially since the youth market, which this Malaysian lottery companies have been completely unable to capture, would be likely to buy the bulk of it.

However, how do we make it RM20 billion in sales?



Tapping into the Halal Market.

For this idea to really work, we need to access into the remaining 75% of the population in a legal way.

Make no mistake, Gambling (“Maysir”) is illegal under Islam. However so is earning interest (“Riba”).

Currently, every single Muslim in the world owe a debt to Anwar Ali. He was the man who changed “interest” to “profit on investment”. Before he did so, banks worldwide were so very sensitive to Muslims religious scruples, that they made sure to not pay interest on any deposits.

It’s amazing what a simple bit of linguistic gymnastics can do.

What are “Sukuk” bonds, except for asset backed/secured bonds? Which Malaysia was the first to issue, before most of the other Islamic countries followed suit.

If one wants to see the full extent of the creativity in linguistics gymnastics, just take a read at a Sukuk Prospectus.

So how can the government do it?

Well, first of all don’t call it a lottery ticket, call it a lucky draw (“Cabutan Bertuah”).

For something to be a lucky draw, it needs to have a characteristic where whatever is bought, would be the same price if it didn’t have the “lucky draw” aspect. The tickets/vouchers need to be given after a purchase.

It can therefore also be structured to be a lucky draw (“Cabutan Bertuah”) as such,

  • Donate to the government and get a lucky draw voucher. If you want you can continue holding the voucher to the lucky draw, if you don’t want, you opt to not take the voucher.


  • Joint venture with companies where they can sell special edition/limited run goods (different taste, design etc) which include a number of these lucky draw vouchers or incorporate these vouchers into their products. Companies that sell essential goods and fast-moving consumer goods are essential. Again if you don’t want, you can opt to not receive the vouchers.


And most of all, at no point, do you ever want to bring any aspect of religion into it and start up unnecessary discussions. Keep it purely secular.

The goal is to make it such that it would be easy to make the leap. People with different religious interpretations can just as easily choose not to buy the special goods.



The Downside

Unless I’m mistaken, ASB once did this lucky draw (cabutan bertuah) thing, for motor vehicles. However, some people complaint that it was haram, and it was brought to an end.

If the government were to do this, and be foolish enough to say that it is Halal, it would be political and religious suicide, where you will start a whole new competition to see who is the most religious and can denounce this the loudest.

In addition, if these currently frozen properties were released into the market, it would likely to accelerate the depression of property value to its real value due to demand to buy property outright drying up.

It should further accelerate once the 3-5 year freeze is over.

However, it is likely to be gradual instead of sudden, as there is no major liquidity crunch beneath it.

There is a big difference between, everyone had a 30-year loan they can’t pay and are forced to sell a property, and someone who won a house in a lottery and in no rush to sell, but wouldn’t mind the money.




This was a fun thing to think about, but I doubt it will ever be implemented, as the execution needs to be done perfectly, and probably by a privately held SPV, for it to not trigger all the religious and political minefields that litter around and on it.

Having said that, if the government actually plans to do it properly and in line with the essence of the idea detailed here, and avoid most of the political and religious minefields,

I have no doubt we can do RM20bil in sales in the first year.

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