In light of the many bank loan rejections, the Urban Wellbeing, Housing and Local Government Ministry have announced the implementation of a new initiative which allows property developers to hand out loans to its buyers.
Intended to help out those who are unable to get a full loan from the bank, or those who are only able to get a partial loan, this move came after much urging from developers to reintroduce the Developer Bearing Interest Scheme (DIBS) which had led to over-speculation from the public in the past.
The loans handed out by property developers will have an interest rate of either 12% or 18% - 12% with collateral and 18% without collateral. Unlike the DIBS scheme, this scheme is not limited to first time home buyers only. Indeed, it is opened to all that the developer deems eligible for the loan. There are also no restrictions on the type of property that the loan will be restricted to.
This move will enable home buyers who have been turned off the idea of buying a property due to numerous rejections a second chance to get a property. According to Minister Tan Sri Noh Omar, sometimes the buyer is only able to obtain a 70% loan, but can only afford the 10% downpayment. In this case, the buyer will be able to obtain the remaining loan from the property developer.
As Minister Tan Sri Noh Omar said, “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.”
As of 8th September 2016, all the property developers are allowed to begin applying for money lending license from the ministry under the Moneylenders Act 1951.
The ministry does however note that there will be strict criteria on who will be allowed to get the license, mainly based on the developer’s company financial standing. The entirety of the process will be handled by the ministry, with no involvement from the central bank at all.
This move to allow developers to start handing out loans has come at a most opportune time as just last month the National Property Information Centre (NAPIC) announced that the number of unsold residential and commercial units has increased by 16%, while 18,908 of the 81,894 units of residential and commercial properties launched in the first quarter of 2016 are yet to be sold.
The figures of unsold properties are equivalent to RM9.4 billion, which is an increase of 15.9% from the fourth quarter of 2015 last year.
According to Real Estate and Housing Developers Association (Rehda) Institute chairman Datuk Jeffrey Ng, the number of unsold units is a direct effect of Bank Negara Malaysia’s (BNM) move when they tightened policies on bank loans due to the growing household debt.
Adding on the rising cost of living in the city, it is not a wonder that first time home buyers have given up trying to obtain a property.