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Standardised loan pact to benefit house buyers

January 4th, 2013 No comments

THE standardised template that all commercial banks in Malaysia have been made to adopt for housing loan agreements will make it easier for customers to understand contract terms and shop around for loans, says the banking association.

Chuah Mei Lin, executive director of the Association of Banks in Malaysia (ABM), said Malaysia is probably the first in the world to have standardised banking loan documentation for the benefit of consumers.

Such a move is not construed as anti-competitive practice, she added.

Bank Negara Malaysia (BNM) late last month announced that all commercial banks would have to adopt a standardised template for the description of key terms and conditions for housing loans or home financing agreements from January 1 this year.

The template only applies to loans for individuals with a principal amount of RM500,000 and below.

Chuah explained that this will cover the bulk of housing loans out there as a survey done last year for 2011 showed that 80 per cent of ABM banks’ straightforward housing/mortgage portfolio were RM500,000 and below.

The template was developed by ABM in consultation with BNM.

“With standardisation, key terms are presented in a manner which is consistent, clear and easy to understand. We’re seeking to de-mystify terminology,” she said, adding that it will also help consumers make a more direct comparison of the financial products and services offered out there.

The standardisation will take the form of a three-part agreement – Parts A, B and C – with only Part A containing the standardised terms. Part A will cover key aspects such as payment and calculation of interest, repayment and pre-payment, conditions precedent, and events and consequences of default.

The ABM’s 13 bank members, which include foreign ones like HSBC Bank and OCBC Bank, have already adopted the template, while the remaining five banks in the country that offer housing loans – Bangkok Bank, Bank of China, ICBC Bank, Bank of Tokyo Mitsubishi and Bank of Nova Scotia – are expected to do by the first quarter of this year.

According to Chuah, banks are free to adopt the template for other types of loans, or for housing loans of above RM500,000, if they wish. “Customers just need to ask their bank if they will do it,” she remarked.

The template does not apply to Islamic banks.

The introduction of the template won’t necessarily cut the process time for loans, Chuah said, adding however that the ABM will undertake a survey next year to see if the turnaround time has actually improved.

As it stands now, for a straighforward housing loan, banks generally take a minimum of 45 days from the time a customer submits documents to the loan being disbursed.

“This is the existing timeline, but some banks are more efficient than this,” she noted.

The template will also be made available in Bahasa Malaysia no later than October 30.

Source: Business Times

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Tambun Indah to launch more projects in Penang

January 3rd, 2013 21 comments

PROPERTY developer Tambun Indah Land Bhd targets to launch at least five new projects in the first half of this year, with a total gross development value (GDV) of RM252.9 million.

All of the projects will be in Penang, where the company has been active in recent years and will continue to do so, as it taps into the growing Penang property market.

The company is actively looking for new land banks in the Klang Valley and other areas where it can develop future projects, either on its own or in collaboration with joint-venture partnerships.

“This will complement our existing undeveloped land bank of 300ha across Penang, which translates into a potential GDV of more than RM3.4 billion that is expected to last until 2020,” said managing director Teh Kiak Seng in an interview with Business Times.

He said the five new projects to be launched in the first six months of this year would allow the group to meet the growing demand for mid-range to higher-end developments in mainland Penang.

Teh said the company is optimistic about Penang property market mainly due to the returning of high-profile foreign direct investment to Penang.

This includes Robert Bosch Solar’s plans to invest RM2.2 billion in its solar energy manufacturing plant in Batu Kawan and Aviatron’s RM500 million investment in a new plant in Penang Science Park on mainland Penang.

He said according to the Real Estate and Housing Developers’ Association Malaysia, the property market in Penang is likely to see sustainable growth of between five per cent and 10 per cent in 2013.

He added that the increased government infrastructure spending will also contribute to the flourishing of Penang’s property market.

The targeted completion of the second Penang bridge in September 2013 and the ongoing double-tracking rail project will improve accessibility to the mainland, he noted.

Commenting on the company’s performance last year, Teh said the company was able to achieve a number of successful highlights and sustain a strong financial performance.

For the nine-month period ended September 30 2012, Tambun Indah launched a total of four new projects with total GDV of RM513.6 million.

The projects were Pearl Indah residential units within the company’s flagship Pearl City township, mixed residential BM Residence project in Bukit Mertajam, three-storey gated terraces and two-storey shop offices Carissa Villas in Butterworth, and Straits garden suites and condominiums located in Penang Island.

“To date, we have recorded high take-up rates of more than 70 per cent for ongoing projects with GDV of RM1.1 billion,” said Teh.

Last year saw the company entering a memorandum of understanding to develop mainland Penang’s first international school with a British curriculum, which is scheduled to be completed in 2014.

He noted that such developments have translated into positive financial performance as the group’s revenue for third quarter of 2012 rose 63.2 per cent to RM221.5 million from RM135.8 million previously.

Net profit doubled to RM29.6 million in the third quarter from RM14.4 million in the previous corresponding period.

Total unbilled sales stood at RM262 million as at September 30 2012, said Teng.

Source: Business Times

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The property outlook for 2013

December 31st, 2012 7 comments

Value & Worth By Elvin Fernandez

IN 2012, Malaysia’s economy continued its steady growth in the order of 5% to 6% a year, a range that it has settled into since the Asian financial crisis of the mid 1990s.

The property market is correlated to economic growth. The residential subsector is also driven by high household formation that stems from Malaysia’s relatively young population with rising income.

Residential prices, as measured against household income, is a key fundamental in this subsector. This is due to the fact that residential properties are mainly owner-occupied that mainly drives demand for residential properties.

To a lesser extent residential properties are also purchased for investment purposes, and thus rents, yields and capital appreciation are also important factors that drive the subsector.

Looking at historical trends, the subsector has shown an average relationship of four to 4.5 times of gross annual household income to residential price. But since five or six years ago, before and after the global financial crisis, residential prices have run up to higher multiples in many of the hotspots within Kuala Lumpur and other major urban centres in Malaysia first in very selected high interest areas and then in a horizontal spread.

The reasons for this run-up are many but can be narrowed to namely the prevailing low interest rate regime locally and globally, and a perception that property is a good hedge against inflation, more so after prolonged periods of low interest rates. There is also the fact that many investors are searching for higher yields to better protect their savings.

Net residential yields have also been falling to levels below 2% a year in many of the hotspots. Fearing a bubble in the sector, Bank Negara, like other central banks in the region, has introduced macro prudential measures, such as tweaking the loan-to-value ratio to defuse it.

This has had some effect but, as it has turned out, it has affected the secondary market (usually 80% to 85% of the residential market) more, than the primary market (where one buys from a developer).

A study of transactions in each of the first nine months of 2009 to 2012, as obtained from the National Property Information Centre or Napic, suggests that growth in transactions is slowing and may soon contract. Transaction numbers for the fourth quarter 2012 are still not out at the time of writing.

It also shows that while the compounded annual growth rate of transactions in the secondary residential market was 4.65% during those years, it was 28.5% in the primary market. While normally the primary market makes up around 10% to 20% of the market, for the first nine months of 2011, it reached an overall 21.76% and for the first nine months of 2012 it has gone on further to touch 24.05%.

The reason for this shift towards the primary market is not hard to rationalise. While Bank Negara has rightly introduced cooling measures in the market, developers, needing to continue to be participants at the same previous levels in the market, have introduced a variety of incentives to secure sales.

The incentives range from the initially introduced 5/95 scheme in January 2009, in the aftermath of the global financial crisis, to moves such as absorption of stamp duty and legal fees by developers, guaranteed rents and in some instances even cash-back payments. All this makes buying from the primary market a better proposition compared with the secondary market.

The allure of the primary market is further strengthened by the fact that in many instances loans can be secured without the purchase price being reduced by the incentives, as it should.

Market values are indeed the basis on which loans are approved but if a large part of the market is, and increasingly, priced at prices which includes the incentives, then the true market value can become hidden, which in turn can result in loans being higher than what they ought to be, and consequently, in a downturn, and or in the event of loan default, the carrying value can be higher than what it ought to be.

These issues need further study so that even better policy can be crafted for the residential property market so that it is sustainable.

In the big scheme of things, a main issue in 2013 for the residential subsector will be the inflow of funds that leave the low interest rate regimes of the developed economies in search for higher yields in emerging markets and in this part of the region.

This include flows into real estate investment.

A number of countries in the region have taken pre-emptive measures to strengthen their residential property sector from any possible repeat of the Asian financial crisis, like situations where cheap money flood in and exit in a hurry when there is an external shock.

While the residential market in Malaysia may not be a direct recipient of such funds unlike in other economies in the region, the fact that Bank Negara is watchful for such factors is evident in our macro prudential measures targeted at the residential subsector.

This indicates that if the market were surge to higher levels than what is seen as fundamentally reasonable, further cooling measures may be the order of the day. Perhaps policy measures then can also focus on maintaining a better balance between the primary and secondary markets.

> Elvin Fernandez believes in the free market and timely nudging by policymakers and key market participants to iron out any, and only where needed, imperfections in the system. To do this, and over time, they need a steady stream of in-depth market knowledge and insight.

Source: The Star

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Bank Negara to standardise housing documents for better understanding

December 31st, 2012 No comments

PETALING JAYA: From Jan 1, all commercial banks will be required to adopt standardised documents for housing loans and home financing agreements involving a principal sum of RM500,000 and below.

Bank Negara said the move was to enhance borrowers’ understanding of the key terms and conditions of the loan agreements, including comparing such agreements.

It said banking institutions were required to present the key terms and conditions by following a template developed by the Association of Banks in Malaysia in consultation with Bank Negara Malaysia.

“The template describes these key terms and conditions using simplified language.

“This will assist consumers when making comparisons between banks and reduce the risk of borrowers who don’t fully understand the contractual terms of their agreements.”

Bank Negara said the initiative was a collaboration between the central bank, Pemudah and the financial industry.

The public can access the template and FAQs at at www.abm.org.my.

Source: The Star

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Forum on strata management

December 20th, 2012 No comments

A SEMINAR on the Strata Management Bill 2012 as well as the Strata Titles (Amendment) Act 2012 will be held at Auditorium C and F, Level 5, Komtar, from 10am to 4pm on Jan 13.

Komtar assemblyman Ng Wei Aik said many people were unaware of the new bill’s contents, including how to handle strata management disputes.

“The bill provides better protection for property owners. It is important that they know their rights,” he said at a press conference.

He said lawyer Lee Khai would talk on the application of the Strata Management Bill while licensed land surveyor Chuang Kuang Han would talk on Strata Titles Application and Problematic Cases.

Registration fee is RM30 per person which includes buffet lunch and lecture notes.

The public, including management corporations, joint management bodies and residents associations are invited to attend.

For more details, contact Ng’s service centre at 04-2270215/017-4108914/012-4290163, fax 04-2278215 or e-mail dapkomtar308@gmail.com before Jan 8.

Source: The Star

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