PETALING JAYA – Interest rates, loan rejections and conflict of interest were some of the issues brought up at a meeting hosted by the Urban Wellbeing, Housing and Local Government Ministry yesterday.
The meeting was held to obtain feedback from industry stakeholders on the ministry’s decision to allow property developers to offer loans to house buyers.
It is understood that the Real Estate and Housing Developers’ Association Malaysia (Rehda), National House Buyers Association, Association of Banks Malaysia and Malaysian Licensed Money Lenders Association attended the 1½-hour long meeting.
The interest rate for such loans was one of the pertinent points of discussion. Although Urban Wellbeing, Housing and Local Government Minister Tan Sri Noh Omar has said the interest rate should be capped at 6% a year, concerns were raised as property developers’ finance costs alone can come up to that figure.
Rehda has said that they are proposing a 2% plus finance costs in the form of interest rates.
It is understood that property developers who already have moneylending licences are offering loans at an interest rate of 8% a year.
Another issue brought up was that property developers would only be able to offer loans without collateral as it would be likely that the properties owned by would-be borrowers are already in the hands of banks. Loans without collateral are likely to be at higher interest rates.
Other issues highlighted include loan rejection rates as well as the risk of default and foreclosures. Questions were also raised about borrowers’ ability to service two loans; one from the bank and one from the developer.
The meeting was adjourned for the ministry to deliberate on issues raised. No timeline was given for a decision.
Last week, Rehda president Datuk Seri Fateh Iskandar Mohamed Mansor, who supports the scheme, said that end-financing and loan rejection are the top reasons for unsold properties in Malaysia.
Fateh, who stressed that only property developers with strong balance sheets would offer such loans, said the interest rates “will not be in the teens” and proposed to cap it at 2% on top of finance cost.
He also said the loans should only be to bridge the shortfall in margin of financing offered by banks, to be offered to first-time house buyers and upgraders.
Property developers who intend to offer such loans would have to apply for a moneylending licence under the Moneylenders Act 1951, which is under the purview of the Urban Wellbeing, Housing and Local Government Ministry.
The scheme was announced earlier this month and presented to the Cabinet last week, which instructed the ministry to fine-tune it.