English World

‘New policy will affect financial stability’

KUALA LUMPUR: While housing developers have lauded the government’s move to issue them moneylending licenses, homebuyers have expressed worry that the measure will adversely affect their financial stability.

A manager in the real estate industry, 38, said allowing housing developers to give loans had its pros and cons, but warned that it would have a negative impact on the people.

“Putting every single debt and predicament (giving 12 to 18 per cent interest on a loan) to the people is a clear act of insanity.

“The level of bankruptcy among youth at a productive age of 25 to 35 will grow and now they have to carry the burden of mortgage loans from the developers,” he told the New Straits Times yesterday on condition of anonymity.

However, he said, the initiative was a good mechanism or an “enabler” to spur the industry to greater heights and reduce the number of unsold units.

A senior executive, who only wanted to be known as Athirah, 28, said while the option of home financing by developers could help those who were blacklisted by banks, she would still opt for bank loans.

“Banks are definitely more reliable. At our age and for first-time buyers, we can get a loan of up to 90 per cent for 38 years.

“And, with Bumiputera discounts, chances are the loan you get will be more than the price you pay because banks give loans based on the actual value of the property,” she said.

Corporate planning senior executive Intan Juliana Rosdi, 30, said the move would result in a higher number of people going bankrupt.

“The move may benefit people who do not get approval from banks as they now have an alternative. Developers who provide buyers with loans must follow similar guidelines to banks and be governed by bodies such as Bank Negara Malaysia.”

She said the interest rates offered by developers were too high and must be lowered to offer a healthy competition with banks.

Lawyer Michael Kong said allowing developers to provide loans of up to 100 per cent under the Money Lenders Act 1951 (Amendment 2011) was not a good move for the market as well as for buyers as it would only benefit developers.

“This is because developers can now be the ‘banker’ by charging 12 to 18 per cent interest. And, when it comes to business, they will definitely mark up the property prices to factor in potential bad debts and defaulters.

“So, instead of the actual price of RM500,000, the developers may sell it at RM600,000 and, on top of that, charge 12 to 18 per cent interest,” he said.

Kong added that no amendments were needed for the act to allow developers to apply for the moneylender’s license, as anyone could apply for it.

Urban Wellbeing, Housing and Local Government Minister Tan Sri Noh Omar on Thursday announced that eligible developers could obtain a licence to provide homebuyers with up to 100 per cent of their housing loans with a ceiling interest rate of between 12 to 18 per cent.

Lawyer Muzil Abdullah agreed with the condition that only eligible developers with deep pockets should be given licenses to provide loans.

“There should be guidelines as to how developers could implement the practice. “Otherwise, how will they have the money? Bear in mind, the loans are disbursed first before the completion of the projects,” he said.

-New Straits Times

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