| KUALA LUMPUR, Sept 15
KUALA LUMPUR, Sept 15 Malaysia is reviewing a
move to allow property developers to lend to buyers, after
concerns that it may cause a subprime mortgage crisis in a
country that already has one of Asia's highest household debt
Malaysia's cabinet on Wednesday asked housing minister Noh
Omar to review and improve the home financing policy proposed on
September 8, that would give property developers money-lending
Noh described the move as a "win-win situation for both
developers and house buyers." Home buyers would have an option
to borrow from builders, who the minister said can charge
interest rates of up to 18 percent.
The proposal was criticized by bankers, economists and
industrialists who feared it would worsen Malaysia's financial
woes and add to its alarmingly high household debt.
"More unregulated lenders and subprime borrowers will
compound the risk of a debt crisis," Nazir Razak, chairman of
CIMB Group, said in an Instagram post on Saturday,
adding that it was a "dangerous idea."
The practice of subprime lending - providing loans to those
with poor credit history at a higher than normal interest rate -
eventually led to the 2008 global financial crisis.
In Malaysia, the housing-loan rejection rate by banks is
near a record high, meaning hundreds of thousands of would-be
buyers could potentially turn to developers for financing.
Household debt in Malaysia as a percentage of gross domestic
product was at around 89 percent - one of the highest in Asia.
The controversial home financing policy proposal comes at a
time when Southeast Asia's third biggest economy is hurting from
weak oil prices. Malaysia's economic growth slowed for a fifth
straight quarter in the June quarter.
Central bank data shows banks' rejection rate for loan
applications for residential property purchases hit an all-time
high of 61.7 percent in January. In July, the rejection rate was
"The scheme is likely to encourage unregulated lending to
households with weak financial profiles, and could undermine the
strength of the financial system if not implemented prudently,"
Fitch credit rating agency said in a statement on Thursday,
adding it could increase risks associated with rising household
A BOOST FOR BUILDERS
If the financing model takes off, it could boost the
Malaysian property market, as financing issues are largely
responsible for the rising number of unsold units.
Developers sold 39 percent of new units launched in the
first half of this year, down from 52 percent in the second half
of 2015, according Real Estate and Housing Developers
Association (REHDA) data released on Wednesday.
"The problem is (buyers) don't have the capacity to find the
margin of financing, " REHDA's president Fateh Iskandar Mohamed
He said Malaysian banks typically offer to fund 75-80
percent of the purchase and developers could use the new
money-lending license to offer to finance the rest.
Mah Sing Group Bhd, a leading property developer,
is reviewing the feasibility of money-lending services though it
has not had any requests from customers, Group Managing Director
Leong Hoy Kum said in an emailed statement.
(Editng by Praveen Menon and Simon Cameron-Moore)