SEPTEMBER 9 — The Minister of Housing and Urban Wellbeing recently announced an interesting proposal where eligible housing developers will be allowed to provide up to 100 per cent financing to home buyers. This lending transaction will be facilitated through issuance of money lending licence by the Ministry itself. The government hopes that the scheme will assist house buyers who find it difficult to secure full bank loans to purchase property. While the developers have lauded this move which they hope will encourage property sales, others have objected to it outright.
The Malaysia Consumers Movement (MCM) in principle supports this scheme as it has a potential to help consumers own property, especially first-time buyers, but demand better details. At this point in time, the MCM is unsure if various stakeholders were consulted before this scheme was announced by the minister.
The MCMs view is as below:
Firstly, we object to the exorbitant interest rates of 12-18 per cent per annum allowed under a money lending arrangement. Purchasers already have access to licensed money lenders if such a need arises anyway, so why is there a need to create a new segment of “glorified” lenders? This type of financing must be treated separately from a traditional lending transaction and the interest rates must be significantly lower. Only then it will benefit consumers.
Secondly, the 10 per cent deposit requirement must be maintained. Purchasers must at least be able and required to raise a minimum of 10 per cent deposit of the purchase price. If a purchaser is not even able to comply with this requirement, how would he/she be expected to pay the monthly instalment in the longer term?
We must remember the revelation made by Khazanah Research Institute, in its State of Household II report, that only 10.8 per cent of urban households are resilient to shocks such as unemployment, accidents, death, interest rate changes and economic slowdowns. This leaves 89.2 per cent of the population in the vulnerable bracket. There must be some financial credibility in the borrowing individual. We definitely would not want to see an increase in the already long list of people being declared bankrupts for failing to pay such high interest loans.
Thirdly, such loans must only be limited to property which has already been completed and strict criteria must be imposed and publicly disclosed before a developer is allowed to quality for such lending arrangement. We definitely would not want to see developers with unproved track record turn money lenders.
Fourthly, the consumer redress mechanism must be solid. Empower the Housing Tribunal with jurisdiction to deal with disputes. Developers must not be allowed to engage debt collectors to recover loans in case of default. Professionalism must be maintained when recovering debt.
The MCM agree that this scheme contains broad benefits but cautions that consumer protection must never be compromised at any cost. We therefore call on the government to postpone its implementation until a full consultation process is carried out with all stakeholders.
* Darshan Singh Dhillon is President, Malaysia Consumers Movement.
** This is the personal opinion of the writer and/or the organisation in whose name it is written and does not necessarily reflect the views of Malay Mail Online.
