/// Banking and Investment News
Bank Negara’s New Circular Meant to Be a
“Property Financing Guide”
More Measures to Curb
Speculations on the Way
developers as a result of
the measures proposed
in Budget 2014,” he said.
Bank Negara’s new circular is meant to serve as a “guide
for banks” while financing house buyers’ purchases.
Property sources said
Bank Negara’s new
circular which bans
interest capitalisation
schemes (ICS) is not an
attempt to fine-tune
the measures proposed
for the property sector
under Budget 2014 but is
merely “a guide for banks”
when they finance house
purchases.
The new circular, effective
Nov 15, which strikes at
the core of Developers
Interest-Bearing Scheme
(DIBS) also includes all
other schemes in which
interests are factored into
the cost of the house.
Said a source who
declined to be quoted:
“Interest Capitalisation
Schemes (ICS) is a generic
term in which the interest
is capitalised, or factored
in as part of the cost
of a property. When
developers do this, it
invariably and inevitably,
rises the cost of the
property price.”
ICS covers a range of
interest payments which
may be not necessarily
fall under DIBS, the
source said.
How this is done, or the
mechanics of it, is not the
issue, the source said.
What is of greater
importance is the
outcome, and in this
case, the outcome is the
increased price of the
property, he said.
70
A check with developers
reveal that most of them
have already removed
DIBS as a selling strategy.
However, they will honour
past agreements signed
before the Budget
2014 measures were
introduced.
A developer offering
three property projects
for sale in Petaling Jaya
says they will continue
to offer DIBS in one
of their three projects
“because that project is
almost all sold and will be
completed in June next
year. So we will continue
with the old scheme.
“As for the second
project, we are offering
Developers Interest
Subsidisation Scheme
(DISS). The buyer will
pay the interest and we
will reimburse him every
quarter if he comes
with the statements or
receipts,” a staff of the
developer said.
The third project has
been given to marketing
agents, she said.
A prominent developer
developing a gated and
guarded project north of
Kuala Lumpur said they
have removed DIBS from
their sales including the
giving of rebates. They
have also outlined the
cost of freebies provided
and in the process, made
the marketing process
more transparent.
“The net price of the
house is provided to our
www.PropertyHunter.com.my
A property consultant
who declined to be
quoted said the Bank
Negara circular to banks
and lending institutions
may have resulted from
a statement by Urban
Wellbeing, Housing
and Local Government
Ministry.
The statement, signed
by National Housing
Department director
general, said following
the announcement
of Budget 2014, the
ministry is implementing
a new condition in
approving housing
development licence and
advertisement and sales
permit.
The new ruling will not
allow the use of ICS, or
any other permutations,
including DIBS effective
Nov 15 in advertisements.
The statement said the
measure is being taken
“to enhance the ability
of the people to buy a
house and to ensure
stable home prices and
also to curb speculation.
“In addition, speculative
activities have an impact
on house prices as
well. This situation may
adversely affect the
property market in the
long run,” the statement
said.
The statement also called
on the public to report
to the department if they
come across any dubious
schemes related to ICS
or any other forms of
permutations.
central bank that took effect
last Friday will pile more
pressure on an already
hard-hit property sector,
even if its merits are likely
to be felt in the long-term,
analysts and industry
executives said.
Dr. Daniele Gambero
Bank Negara issues circular
to banks that virtually
eliminates the possibility of
any circumvention of the
banned Developer Interest
Bearing Scheme (DIBS).
According to property
expert Dr. Daniele Gambero,
this will be a tsunami in the
residential property sector
as DIBS has been removed
and no forms of replacing
scheme such as rebate or
cash reward scheme are
permitted.
Dr. Daniele Gambero told
Property Hunter, “on top the
LTV (Loan to Value) will be
calculated after deduction of
all the free-free-not-so-free
things that developers are
currently adding into the
selling price such as;
•
•
•
Loan Agreement Legal
Fees and Stamp Duty
Renovations such
as Kitchen, Airconditioners, Furniture,
Water Heater and so
on
Cash Back, Guaranteed
Return, Lucky Draw for
trips
Everything might be
deducted bringing the
“Net Value” of the property
down to the bricks. The
purchasers at the end
will probably get 80% the
lucky ones even less the
unlucky ones”. Gambero
also Property Hunter, he
predicts property values to
drop a 7% - 10% in the next
4 to 6 months in recovery to
a healthier and sustainable
market.
A new circular from the
In a bid to make the
property market sustainable,
the new rules have put
the brakes on interest
capitalisation schemes (ICS)
and the developer interestbearing scheme (DIBS).
It also calls for the use of
the net selling price of a
property as the benchmark
for obtaining bank loans,
which raises the amount to
be paid upfront.
Alliance Research’s banking
analyst Cheah King Yoong
said the measures were
“more onerous” than
anticipated and posed
downside risks to his 9%
loan growth estimate for the
banking sector next year.
“Although the guidelines on
the prohibition of the DIBS
was not a surprise, the new
rule on using the net selling
price to determine the
loan-to-value (LTV) ratio is a
negative surprise to us.
“While it is difficult to gauge
the impact on banks, the
fact that this new rule
applies to all property
financing, including first-time
home buyers, means that
property buyers’ affordability
will be affected, and this will
lead to lower property loan
growth,” Cheah said in a
report yesterday.
“We believe the latest
policies illustrate the sheer
determination of the
authorities to contain th B