It is almost unheard of for a sitting minister to tell off another sitting minister for some silly, knee-jerk proposal by the latter supposedly for the good of the people. Finance Minister II Datuk Johari Abdul Ghani should be commended for his quick response to Local Government Minister Tan Sri Noh Omar on his “win-win” formula of offering money lender licences to housing dev elopers so they could give loans to those who can’t get them from banks, all in the “interests of buyers in mind”.
And the interest he is allowing developers to charge under his scheme is a “maximum of 12 per cent with collateral and up to 18 per cent without collateral”.
Didn’t Noh’s common sense tell him that if someone can’t get a loan from a bank, his credit rating must be poor. Should such people be put into further financial mess by allowing developers to give them loans at such high interest rates? If developers are having difficulty selling their house, it is their own doing for building costly houses for higher returns. How many average income persons can even buy RM500,000 properties?
He also seems to be saying that the houses people buy are not collateral for the developers’ loans. So they need to provide some other collateral to enjoy a 12 per cent interest. Isn’t this a load of nonsense? Had he taken a few minutes to look at the moneylender’s licence, he would have seen that the 12 per cent and 18 per cent rates are for personal loans.
So his “win-win” situation is not in any way to help low-income people buy houses, but for developers to make double profits, i.e. from sale of the houses and on loans given to purchasers at 18 per cent interest, if the properties they purchase are not considered collateral.
At 4.50 per cent interest on a RM500,000 property (full loan), payable over 20 years, a buyer would be paying RM3,163 monthly; at 12 per cent, RM5,505 and at 18 per cent, RM7,716. So a buyer who can’t get a loan with repayment of RM3,163 monthly can now get a loan from a developer and pay between RM2,342 and a whopping RM4,553 more to make a total monthly payment of RM5,505 or RM7,716. What a brilliant idea in the interest of house buyers. This is so lucrative for developers and some have quickly expressed full support.
Did Noh even do some simple calculations before proudly announcing his solution to the housing problem? Or, because his ministry is the one that issues money lender licences, he just dreamed up an idea with the “interests of buyers in mind!” He now says his ministry will study the proposal thoroughly. So this is how things are done in Malaysia, put the cart before the horse.
What do house buyers, or car buyers, want to know about their financial commitment? A big majority are unable to make calculations of their own. Their concern is the monthly repayment that needs to be made. Even for loans taken from banks, there are so many defaulters. So many properties are being put up for auctions, and many borrowers end up as bankrupts. They are from the lower income groups, whom Noh Omar wants to help with high interest loans from developers.
Looks like Noh Omar was rushing to achieve some KPI of his Ministry by pulling out a trick from the magician’s box, regardless of the consequences.
This “win-win” idea is symptomatic of the way many things are being done without careful thought. The worst example of this knee jerk or on the spur of the moment solutions can be seen in the education system which has broken the schools. It stems from the big-headedness of politicians who feel they are right in whatever they do as they are the shepherds and the rest are sheep.
The government should be helping the weaker parties and not putting them at the mercy of the stronger ones. Allow developers to give loans, but limit the interest to no more than what banks charge for housing loans, without add-on service or other charges for this and that to squeeze as much as possible from the house buyers.