WHY DID NAJIB MAKE NOH OMAR HOUSING MINISTER? BECAUSE HE’S SMART OR TO MAKE LOAN SHARKS & TYCOON DEVELOPERS HAPPY?
Another Hare Brained Idea By Noh Omar : Housing Developers As Financiers
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Thursday, 8 September 2016
developers apply for moneylenders licences to provide loan 100% to property buyers.
licence under Moneylenders Act 1951 (Amendment) 2011.
Noh Omar allowing developers to provide housing loans
to overcome difficulties faced by buyers in securing bank loans.
proposal is a win-win solution for both developers and house buyers,” he said
Noh said developers could profit from sales of property and end-financing schemes.
loan repayment period could be between 10 to 20 years
Interest rate maximum 12% with collateral, to 18% without collateral.
Noh allowing developers to provide loan to overcome difficulty in closing sales.
My comments : These are strange ideas from a kaum who do not understand business, risk financing or even housing development.
First of all interest rates of 12% to 18% will kill the house buyer. These are Ah Long rates.
Say a terrace house costs RM500,000 (in a very poor area of the Klang Valley). At 100% financing, the annual interest will be RM60,000 (for a secured loan).
That is RM5000 a month interest alone !! What about repaying the principal? Over a 10 year term the principal repayment alone will be about RM4000 per month.
Principal plus interest will be about RM9000 per month on a 100% financing for a RM500,000 house over a 10 year term.
Ok, no financiers in their right mind will provide 100% financing. Unless maybe it is Noh Omar Moneylenders !!
The real intent (I read the feedbacks and discussions on this) is to bridge the gap when the housing loan is not enough.
Say a house buyer pays 10% deposit, the bank approves 80% financing, then the house buyer is still short of 10%. There is a ‘gap’ of 10%.
This is where the developers can fork out this “bridge the gap” loan.
So 10% of say a RM500,000 house is RM50,000.
10% of say a RM300,000 apartment is RM30,000.
But here is the risk element. A bank decides to give a borrower 70%, 80% or 90% financing based on many factors. Mainly based on the borrowers income, expenditures, capacity to repay etc. It is usually an informed decision. Banks should be expert at this.
If a bank says you only qualify for 70% house financing the bank knows that you can only afford the monthly instalments for 70% financing. The banks have simple methods to calculate the repayment capacity.
So if you do not qualify for a housing loan, or the bank only approves say 70% loan, what the bank is saying is, ‘Encik, this house is not within your financial capacity. Please buy a cheaper house that is affordable for your monthly repayment capacity’. So the bank actually plays a “regulator” role by not creating housing debt bubbles.
Now if Noh Omar’s developer steps in and ‘bridges the gap’ for the remaining 20% (assuming the buyer pays 10% deposit) the developer is only heaping extra debt burden on the house buyer.
The developer is not ‘bridging the gap’. The developer is creating extra debt burden on the house buyer with higher default risk. And also jeopardising the buyer’s repayment capacity for TWO loans now ie the bank loan as well as the developers loan. There is a higher risk of loan default. In no time at all the developers will create a ‘housing debt bubble’.
This is not clever at all. Folks, I dont think Noh Omar will understand any of this.
And how is the developers ‘bridge the gap loan’ going to be secured ? Apa ‘cagaran’ dia?
Say that the house is already charged / mortgaged to the bank for that 70% financing, how is the developer going to get a charge or mortgage to secure their ‘bridge the gap’ 20% loan?
The banks will certainly NOT consent to a second charge. Even if they do, which developer (especially if they are public listed) will accept a second charge mortgage, ranking behind the bank’s first mortgage?
Takkan developer pun bodoh?
Developer can make an ‘unsecured loan’?
I say kawan, the developer will be insane to make an unsecured loan to a house buyer (ie without taking out a mortgage on the house). They will not even make an unsecured loan to their own mothers.
Also developers are in the business of building and selling houses. Developers are not financial experts. In order for them to enter into money lending, they will need to hire or develop housing loans expertise. This will add to their cost of doing business.
Another hare brained idea by Noh Omar. – http://ift.tt/1PCXAxA
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Penyumbang : Malaysia Chronicle http://ift.tt/2c8wqpf
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