Although only two restrictions have been placed on borrowing for the purchase of a third or more homes and credit card eligibility, it does not mean that there won’t be more to come.

In fact, consumers should be vigilant as Bank Negara is believed to be putting more intensive supervision on certain aspects of the property and personal loans sectors.

For example, the 5:95 property loan scheme offered by certain companies falls under this category of supervision.

Under this arrangement that was implemented during the market doldrums, only 5% downpayment was required for the purchase of a property with the rest of the financing in the form of a bank loan.

There was talk that the 5:95 scheme was mainly extended to affluent housebuyers but the bulk of the repayments are coming onstream this year. Hence, the monitoring of these repayments as well as pockets of borrowing that are still available under this scheme.

Personal loans form 15% of the total loans portfolio but due to the higher borrowing rates, extra care and discipline are required to guard against over-borrowing.

The extension of credit by non-bank institutions is also being monitored amidst lessons gleaned from countries suffering from high indebtedness.

Credit schemes extended by cooperatives and cooperative banks are likely to be scrutinised for affordability on the part of the borrowers.

Covering all aspects of household loans, the upcoming guidelines on lending and affordability represent part of the internal controls that are put in place to monitor the situation.

Under this surveillance, over-lending to single borrowers is discouraged.

In fact, the entire credit scenario is being assessed via a holistic package of policies and measures that cover prudential, intensive supervision, standards on banking institutions and consumer education.

Household indebtedness, at 75.9% of Gross Domestic Product at the end of last year, may be on the increase but indications are that it has not become destabilising.

On the contrary, wealth accumulation remains healthy with liquid assets forming 64% of financial assets while delinquency levels remain low – the non-performing loans for credit cards is at 2%.

Nevertheless, it is not a time to be sanguine especially when high energy and commodity prices pose risks to the economy.

SOURCE: The Star

THE government will allocate a portion of its landbank for the construction of affordable housing, especially for Malaysians eligible for the My First Home Scheme.

Housing and Local Government Minister Datuk Chor Chee Heung said the affordable housing project, which will likely be stratified properties or apartments, will either be built by the government or through joint ventures with the private sector.

"The government is looking at its landbank for the purpose of building houses for those earning RM3,000 a month and below.

"We also hope that the state governments will do their part by imposing quotas for developers to build affordable homes, besides low-cost houses," he told a news conference after launching Green Building Index Township Rating Tool and Residential New Construction Tool (Version 2) in Kuala Lumpur yesterday.

Chor also said that the government will start paying some RM1.4 billion annually to Alam Flora Sdn Bhd, SWM Environment Sdn Bhd and Idaman Bersih Sdn Bhd once the concession agreement is signed between the government and the three waste management companies.

He said local councils in Peninsular Malaysia will collect some RM900 million from households for waste management services provided by these concessionaires, while the federal government will top up about RM500 million.

Once the concession is signed, he said, the three operators must perform their duties according to the agreement and key performance indicators.

Chor said the operators will also be able to deliver better services as they can use the concession agreement as collateral to obtain financing for capital expenditure.

He said for the past 13 years, the three operators have been utilising their own resources in providing the services, besides not receiving full payment from the state governments.

"We are currently studying the intricacies of the contract, which will take between three and four weeks. Then, we will submit it to the Cabinet, before it is submitted to the National Council for Local Government," he said.

The minister, however, did not give the targeted date for the signing of the concession agreement.

Currently, Alam Flora is responsible for Selangor, Kuala Lumpur, Pahang, Terengganu and Kelantan; SWN for Negri Sembilan, Malacca and Johor; and Idaman for Perak, Kedah, Penang and Perlis.

Commenting on the statement made by Penang Chief Minister Lim Guan Eng to allow the state government to opt out of the Solid Waste and Urban Cleansing Management Act and choose its own contractor for the services, Chor said: "Let time convince those state governments that do not agree."

It is understood that there are three states that have yet to accept the taking over of solid waste services by the government-appointed concessionaires.

SOURCE: Business Times

Nineten is part of Permai Village development located at Tanjung Bungah, Penang. It comprises 3-storey semi-detached house with a total 40 units. The semi-detached house come with 5+1 bedrooms and 5 bathrooms with a gross built-up area of 4,835 sq.ft. The land size of each 3-storey semi-detached house measuring from 3,218 to 12,712 sq.ft.

Property Project : Nineten
Location : Permai Village, Tanjung Bungah
Property Type : 3-Storey Semi-Detached
Tenure : Freehold
Built-up Area : 4,835 sq.ft.
Land Area : 3,218 – 12,712 sq.ft.
Total Units : 40
Developer : BSG Property
Indicative Price: RM 2,000,000 onwards

The Penang Malays Association (Pemenang) is planning to build 5,000 apartment units with a built-up area of not less than 1,000sq ft each in George Town.

Its president Datuk Seri Mohd Yussof Latiff said the units would be built on 11.33ha of land, among others in Kampung Makam, Kampung Dodol, Jalan Datuk Keramat, Jalan Perak, Jalan Sungai Pinang and Jalan Patani.

It was reported last year that the association, through its property arm PIEMPIPI (Pemenang) Bhd, was holding discussions with Amanah Raya Bhd (ARB) to develop the land in George Town and turn it into a Malay heritage area.

He said Pemenang would seek the cooperation of the state Islamic Religious Department and the state Islamic Religious Council to implement the project.

“The state government is also supportive of the plan. We will soon hold talks with the Federal Government on this.

“We are planning to recover land which have been mortgaged. This way, the Malay community would be able to live comfortably in the city with sufficient amenities,” he said at a press conference to commemorate Pemenang’s 84th anniversary.

At the function, he handed over a framed photograph featuring the country’s nine Rulers and the ‘7 Wasiat’ that was articulated in the The Federation of Malaya Agreement on Aug 5, 1957 to the association.

He said the photograph was an enlarged version of a similar one from his personal collection.

SOURCE: The Star

The residential property market has been experiencing an upturn since the fourth quarter of 2009 as demand rebounded by 7.1% (2009: -2.3%) following improved consumer sentiments. Meanwhile, the increase in housing stock moderated in 2010 as housing started a declining trend.

The widening gap between supply and demand has kept property prices elevated, although at the national level, the Malaysian House Price Index rose only moderately by 6.2% up to the third quarter of 2010. Substantial increases in house prices had been observed in selected locations within and surrounding the urban areas where price increases were up to four times higher than the national house price index.

Price increases in these locations have in turn resulted in prices of properties in the surrounding locations to increase, making homeownership increasingly less affordable for the average Malaysian. There have also been incidents of applications for financing of multiple residential units within a single development project from a single borrower.

To address this development, borrowers are subjected to a loan-to-value (LTV) ratio of 70% for the third and subsequent house financing facilities with effect from Nov 3, 2010. This measure aims to promote a stable and sustainable property market by deterring speculative activity through higher equity requirements for transactions of these nature.

In January 2011, Bank Negara revised the risk weights applied under the capital adequacy framework from 75% to 100% for housing loans with LTVs exceeding 90% to further reinforce prudent underwriting practices.

While a large fraction of household borrowings was collateralised (45.3% was for the purchase of residential properties), personal financing had increased significantly as outstanding personal financing grew by 17.5% to account for 14.6% of household debt last year (2006: 9.6%).

Development financial institutions (DFIs), cooperatives and building societies accounted for the bulk of this growth, with almost 80% granted under salary-deduction schemes. The absence of robust credit and affordability assessments will result in households being more at risk of becoming over-indebted, while the risk of defaulting on financing obligations, including those obtained from other banking institutions, will be higher for borrowers who have over-borrowed.

Excluding the DFIs, personal financing exposures of commercial banks increased at a lower rate of 13% to account for 8.6% of banking system household loans.

Despite a reduction in the number of cards owned by households following the imposition of a RM50 fee by the Government on credit cards in 2010, outstanding credit card balances increased by 15.2% to RM30.8bil as at end-2010 to account for 5.3% of household debts. Similarly, outstanding balances per credit cardholder rose by 15.1% to RM9,516 as at end-2010. The number of credit card holders with revolving balances (excluding defaulters) accounted for 47.9% of total credit cardholders.

More than half of credit cardholders with revolving balances were those earning an annual income of RM36,000 and below. Meanwhile, the level of non-performing loan (NPL) ratio for credit cards issued by banks and non-banks remained low at 1.7%. To ensure that credit card debts are maintained at manageable levels, a number of pre-emptive measures have been introduced, including raising minimum income eligibility, limiting the number of credit card ownership and aggregate credit limit for those with annual income of RM36,000 and below.

Loans-in-arrears across most categories of household debts remained stable, while loans-in-arrears for personal financing, which drifted upwards in the early part of last year, started to come down in the fourth quarter of 2010. As at end-2010, the NPL ratio for household loans was 2.3%. The ratio of household loan repayment-to-disbursement increased marginally to 87.8%.

The highly-competitive environment and the increased indebtedness of households have called for pre-emptive measures to preserve the resilience of the household sector going forward. Although personal bankruptcies and relapse rate among borrowers under AKPK’s Debt Management Programme have been manageable, they have been on the increase since 2007.

Several initiatives have been implemented during the year to ensure the continued resilience of the household sector, including a programme to educate younger and first-time borrowers on responsible borrowing, tighter standards for credit cards and enhanced requirements on the conduct of business by financial institutions in retail financing.

Bank Negara will also issue new guidelines by April on the conduct of business in retail financing, which set the minimum standards to deliver a more responsible approach to lending by the financial institutions.

SOURCE: The Star