Putrajaya allows developers to give housing loans

Urban Wellbeing, Housing and Local Government Minister Tan Sri Noh Omar announces that developers will be allowed to provide loans. — Picture by Choo Choy May
Urban Wellbeing, Housing and Local Government Minister Tan Sri Noh Omar announces that developers will be allowed to provide loans. — Picture by Choo Choy May

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PETALING JAYA, Sept 8 — The Urban Wellbeing, Housing and Local Government Ministry today announced the introduction of an initiative that enables property developers to give out loans to buyers at an interest rate of between 12 and 18 per cent.

Minister Tan Sri Noh Omar said that the move is intended to assist Malaysians who are unable to get a full housing loan from banks or those who may only be given a partial housing loan.

“In order to relief burden to the buyers, sometimes it's hard for them to get bank loans, that's why the ministry agreed to give money lending licenses to any developer that is interested, especially developers that are more established.

“Because sometimes the buyers, they don't get 100 per cent loan. Sometimes the bank only gives them a 70 per cent loan and they only have money to pay 10 per cent so the balance, the developer can give them a loan," he said during a press conference after officiating the 19th National Housing & Property Summit 2016 at the Sunway Resort Hotel & Spa.

He explained that the ministry decided to introduce this initiative after industry players urged Putrajaya to reintroduce the Developer Interest Bearing Scheme (DIBS) that was abolished in 2014 after it led to massive speculation in the property sector.

“This proposal is a win-win situation for both developers and house buyers. For the developers, this end-financing facility offers a second profit centre. First, of course, from the sales (sic) of these houses and second from the proceeds of the end-financing scheme that I am proposing,” he said during his speech.

He explained that all developers will be able to apply to the ministry for a money lending license beginning today in accordance to the Moneylenders Act 1951.

However the government’s award of such licenses will be dependent on a variety of factors, especially the company's financial standing.

He added that the scheme will not involve the central bank and will be wholly handled by the ministry.

Additionally, he said developers will have full autonomy to decide who will receive the loans as it will not be restricted to first-time home buyers, unlike the DIBS.

The ministry also did not impose any restrictions on the types of properties the loans will apply to.

Loans will be given out at an 18 per cent interest rate without collateral and at a 12 per cent interest rate with collateral.

This comes after Malay Mail Online reported last month the National Property Information Centre (Napic) as saying that number of unsold units in both residential and commercial properties climbed by 16 per cent in the first quarter of this year.

Real Estate and Housing Developers Association (Rehda) Institute chairman Datuk Jeffrey Ng said that this was a direct result of Bank Negara Malaysia (BNM) tightening policy on bank loans due to growing household debt.

This, on top of the rising cost of living, resulted in buyers, especially first-time home buyers, opting not to purchase property altogether.

According to Napic, 18,908 of the 81,894 units of residential and commercial properties launched in the first quarter of 2016 have yet to be sold.

These unsold properties amount to RM9.4 billion and it is an increase of 15.9 per cent from the value of unsold units in the fourth quarter of last year.

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