PETALING JAYA — The Cabinet has directed the Housing and Local Government Ministry to further study its decision to allow property developers to offer housing loans to buyers.
Its minister, Tan Sri Noh Omar, said since several companies had been granted licences under the Moneylenders Act 1951 to offer loans for deposit payment after the policy was introduced last week, the ministry would be evaluating several pertinent issues.
Among them were the effectiveness of the policy to help house buyers finance their loans, and setting an interest rate which would not burden the people.
“Other issues which we will be looking into include setting a clear guideline which will be understood by both the developer (who is also the licensed moneylender) and the borrower,” he said.
The ministry would also take proactive action to study the regulations under the 1951 Act to ensure lincensed moneylenders under the scheme did not abuse the system.
Last week, Noh announced that eligible property developers would be allowed to apply for moneylending licences to help buyers finance their purchases.
The licences would be issued by the ministry with loans subject to an interest rate of up to 12 per cent with collateral or up to 18 per cent without collateral.
Analysts had earlier said the move was a “double-edged sword”, possibly benefiting and harming sector players at the same time.
TA Research believes the proposal was not an effective initiative to improve home ownership among low to middle income groups.
TA analyst Thiam Chiann Wen said: “Based on our analysis, a buyer will need to pay 138 per cent more in monthly instalments if he or she takes up a developer’s 35-year loan that offers 100 per cent financing at 12 per cent interest rate, compared to conventional banks’ 35-year loan at 4.5 per cent after paying a 10 per cent downpayment.”
Thiam added if a consumer’s loan application has been declined due to poor credit history, this scheme would not help buyers secure their dream home.
Inter-Pacific Securities head of research Pong Teng Siew said only large-scale developers would consider adopting such a move and would only be able to do on a small scale.
“We cannot expect them to do a good job in issuing loans because they do not possess the skills or experience to do so.”
Meanwhile, citing the high percentage of end-financing and loan rejections as the main contributor to the decline in property sales, the Real Estate and Housing Developers’ Association Malaysia (Rehda) said developers may now offer financing for downpayment.
The scheme will apply to buyers purchasing homes priced under RM500,000.
Rehda president Datuk Seri Fateh Iskandar Mohamed Mansor said the main problem purchasers faced when buying homes was the margin of financing provided by banks.
“They are receiving 75 per cent to 80 per cent of the finance margin, and that is where developers can come in to assist with the 10 per cent to 15 per cent for the downpayment,” he said at a media briefing yesterday.
Fateh Iskandar said there were risks involved in the financing scheme by developers because only a handful were able to provide such financial help to buyers.
“There is no such thing as developers can finance buyers up to 100 per cent,” he said.
He said it was unfair to extend financial assistance only to first-time buyers as first-time upgraders made up of 21 per cent of the 90 per cent end-users who purchased homes.
“What do we do? Ignore them? It is not fair because these are buyers who have worked for perhaps over 10 years and have expanded their families and, therefore, need bigger homes,” he said.
He said the demand for property was still present with 7,172 units launched in the first half of this year, and the inability to obtain financing remained the main reason for the decline in sales.
“We met with the Housing and Urban Development Ministry on Tuesday and we will also hold discussions with the Finance Ministry to see how best we can come up with a solution,” he said
Fateh Iskandar said Rehda would call on its members to discuss the matter.
“There will be risks and challenges and it is something developers will have to sit down and come out with a best way to resolve the matter,” he said.
He said while they were supportive of the financing scheme, the interest rate imposed on buyers had yet to be decided, although it would only be a “small amount”.
“We will have to get loans from banks as well, so we are looking at maybe two per cent on top of our cost,” he said.