Propsocial property developers giving out loans risk
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The move approved by the Government could help home buyers tremendously, providing a second chance for Malaysian property buyers who could not secure a loan, as well as to boost the sales of properties in the gradually slowing Malaysian market.

Under the Moneylenders Act 1951 and Pawnbrokers Act 1972, developers may provide up to 100% of financing to buyers, or just the amount that their (buyers) bank loans do not cover.

If you are one of the many Malaysians who were not able to secure a loan, read Top 10 Reasons Why Your Loan Application May Have Been Declined to find out more.


No significant impact

Most analysts and market watchers predict that this is the beginning of some relaxation efforts by the government, signalling the end of initiatives to cool down the property market.

Despite the hype surrounding the scheme, a research by CIMB Research Equities had found that the impact of its introduction was not as consequential as predicted.


Developers not keen to provide financing

The reason for the insubstantial impact on the sales of properties, as reported by the research, is the fact that developers are not too willing to begin providing financing to buyers.

“Based on our checks, most developers are not keen to start providing financing to their buyers in the near term,” stated the CIMB Equities Research report.


High risk for developers to give out loans

The research detailed that risk was a major factor causing developers to be hesitant in giving out loans to buyers. Key factors to this reluctance include:

1. Funding

Substantial amount of funds is required to be able to offer such financial facilities.

As the CIMB Equities Research explained, “…we believe only the developers with strong balance sheets will be keen to explore this option to boost their sales”.

The report added that developers which are more likely to be able to provide financing (or some form of it) to buyers, would be those which are “in net cash or near-net cash positions”. Realistically, such a position applies only to a few major developers.


2. Interest rates

The scheme also caps interest rates at an annual rate of 12% (or 18% without collateral), which, as the report asserts, “…is lower than the return thresholds required by most developers”.

Apart from that, the CIMB Equities Research also voiced concerns that the move not only poses the risk of defaults to developers, but also adds to the purchase cost of homebuyers, as banks are already allowing a 60% to 70% debt service ratio.


Giving loans not the only way to boost sales

CIMB Equities Research adds that mass-market housing remains a potential goldmine, given the high demand for the mass-market properties launched in recent years. In fact, there is not enough supply of affordable homes to meet the demand! Thus, honing the potential of this largely untouched market is a conceivable way for developers to boost property sales without having to take on the risks of providing financing to buyers.


Conclusion

Though the report had found that developers may not be too enthusiastic to provide financing to homebuyers, it does not completely eliminate the idea, stating that perhaps developers with firm balance sheets would offer other ways of financial assistance in the future.

So if you’re planning on buying a home, check out the things to look for when applying for a housing loan as it won’t be any time soon that developers will be giving out loans.


Tell us what you think

Do you think allowing developers to provide financing is a good move? What types of financial assistance would you like to see from developers in the future? Share your thoughts with us below and be rewarded!



(Reference: http://www.malaysiapropertynews.com.my/2016/09/immediate-impact-from-property-developers-financing-nod-small-.htm)

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Interest at 12% or up to 18% without collateral... this rate is similar to credit card debt... it will be near impossible to repay it. Irregardless of the amount and loan margin.

James bond craig junio2006 small

Ya I agree with you Dominic. I wonder if anyone took this up yet? Or has this already been implemented?

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Borrow from Loan Shark aka Ah Long, sure can get anytime... easier to get the loan in cash, but interest might differ.

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Difficult to find good tenants, afterall "good" is defined by landlords' own preferences/living styles.

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If a developer provide such a loan, does that mean that the property you bought from the developer will be charge to the developer?? 

Any how I'm really interested in the developers' loan agreements. Wonder how much would it differ from bank's agreement? Is it the government will regulate on this issue like HDA or it will be treated as an independent commercial agreement?  

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maybe developer get a big amount of loan with x % rate then issue to buyer with x % + y % of rate to earn the variance. :) if resident cant pay then resell to other buyer.

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Developers are coming up with all these solutions for property buyers because one of the biggest reasons why their property sale is slow is because of the bank loans. It's not easy to get a 90% bank loan anymore and property buyers can't afford to fork out a huge sum upfront.

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What to do? Currency devalued, living cost increased, salary remains the same. 

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for invididual, increase earning income as much as possible.

for government, really think about how to build more affordable home. 

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Kate chew small

12% - 18% is like 'ah long' :P 

Any developers implemented this yet?

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saw a lot of ads from developer but do not really ask about it how it's work. 

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@Nic.

Can you please share which developers are currently offering this loan to potential buyers?

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The purchase price is is fully paid for the property but not the transfer of title. 

The fees is for the Memorandum of Transfer (MOT), this is usually pay by the purchaser unless developer promised to give a free MOT. The MOT is calculated based on the % of the purchase price. 

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@ Lee

Basically, considering a property in the same category. Because of the cost of MOT. Buying a strata titled property is more costly than a non-strata... Am I right?

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LOL...why do i talk about MOT here...wrong post...sorry.

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@ Lee... Yes please discuss more about Loans given by developers instead. LoL

I can't wait to see any success story out there where the developer helped the purchaser with a much needed loan.

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I have a chance to work on developer's loan, but was told that these loans are only available to foreign purchaser only. Hahahaha. 

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@ Lee. Oh, Foreign purchaser. Which means they are only eligible to buy property which are more than RM1mil?

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