The Penang government said it would not allow property developers who also offer housing loans to buyers to operate in the state, after a minister’s proposal to allow home builders to as as money lenders at an annual interest rate of 18%.
The state will also direct local councils Majlis Bandaraya Pulau Pinang (MBPP) and Majlis Perbandaran Seberang Perai (MPSP) not to approve projects by developers who indulge in such a business.
“Lending at such high interest rate to housebuyers is a recipe for future disaster because in a year, there will be mass foreclosure and auctions by property developers on housebuyers unable to pay at ‘Ah Long-like’ rates,” said Penang chief minister Lim Guan Eng today.
He said developers could only afford to give out loans at such a high rate as they themselves were lending from commercial banks.
The move comes days after Urban Wellbeing, Housing and Local Government Minister Tan Sri Noh Omar created an uproar over his proposal to allow developers to also offer home loans to buyers who were not eligible to bank loans.
Economists and interest groups, including National House Buyers Association have warned that the proposal would worsen Malaysia’s debt crisis.
Noh’s proposal also drew criticism from CIMB chairman Datuk Seri Nazir Razak and Second Finance Minister Datuk Johari Abdul Ghani, while PKR’s Rafizi Ramli suspected that the move could be Barisan Nasional’s plan to increase its coffers in time for the next general election due in 2018.
Lim said the government should clearly differentiate the roles of banks and developers.
“Mixing up the two will definitely cause financial crisis and economic collapse as proven by the sub-prime lending crisis in the US,” he said.
He blamed the failure of banks to financiall assist first-time house buyers on BN’s failed economic management “until the Federal government has run out of money”, and questioned why the high household debt despite strict guidelines by Bank Negara Malaysia on lending.
“This begs the question why Bank Negara did not direct the banks to lend to first time housebueyers and the poor, when many low-cost and low-medium cost housing are empty because the poor cannot secure bank loans?” asked Lim.