Permas is totally shocked and disappointed with the recent statement by the Federal Territories and Urban Wellbeing Minister Raja Nong Chik Raja Zainal Abidin who announced that the Kuala Lumpur City Hall (DBKL) is offering low cost housing loans to low income earners from a funding of up to RM1.5 billion obtained from the Employees Provident Fund (EPF).
It is very obvious that the federal government seems to have run out of ideas to tackle the issue of housing for the poor. The people’s savings stored in the EPF has become the scapegoat of the Minister Raja Nong Chik and the federal government in their bid to try and fulfill promises of housing for the poor, or perhaps is it a sad but risky ploy to buy favour and votes from the rakyat?
Point 1:
We recall clearly that this same minister was reported in the Malay Mail dated July 19, 2010 to have said that Prime Minister Najib Razak had instructed Bank Negara to take the initiative to ensure the banks assist the interested buyers and that a meeting was held between the ministry, DBKL and bank institutions resulting in nine major banks expressing they were willing to partake in the effort. The minister had further announced a special fund would be set up, backed by these selected banks and that the Credit Guarantee Corporation was willing to act as a guarantor for their housing loans.
Raja Nong Chik was also reported to have said that, "There should be no cause of concern for the banks to provide financial assistance to the PPR flat buyers as this is a secured asset." And that the ministry would also continue to monitor the development between loan-applicants with the banks on this matter.
Permas questions the sudden turnabout of decision of detracting the responsibility of bank loans from these nine banks to the EPF. Is it because these banks who had agreed to partake in the special scheme pulled out and the government had to resort to desperate measures to fulfill what was promised one and half years ago?
Point 2:
The minister was reported to have also announced that, “This is a pure business transaction by the EPF with returns of 5.5 percent guaranteed by DBKL.” He also explained that DBKL would only offer these loans to residents who had no outstanding debts with DBKL.
He also explained that the deal was guaranteed on many levels including a 20 percent retention account held by DBKL and the EPF and DBKL could take back the property and sell it to one of the almost 30,000 other buyers in the waiting list in the event a buyer defaulted payment for six months.
But once again we recall that in July 2010, this minister had explained that DBKL is not a registered financial institution under Bank and Financial Institution Act (Bafia) and thus cannot be the administrating body of a home-purchase scheme and not authorised to offer hire-purchases of the PPR low-cost homes.
And yet today minister Nong Chik declares that DBKL will stand as guarantor for these loans and will back with their reserve of RM 1 billion. The question that begs to be asked – can DBKL act like a financial institution and play this role since the minister himself had explained that DBKL is not registered under Bafia?
Point 3:
The minister also said that, “Not more than 10 percent will default,” and he expected the figure to be as low as five percent. He said that those renting DBKL flats with good track record, have good chances of buying the houses and that under this scheme, no deposit is required and applicants are eligible for 100% loan.
However the same minister had informed the public just 18 months ago that "Right now, we have the rental arrears amounting to RM30 million and that the rent arrears could increase to RM90 million if the hire-purchase scheme were to be realised."
Now another question begs to be asked – if the minister has said that back rentals has accumulated to RM30 million, now what is the guarantee that the housing loans currently pedaled by the Minister funded by the EPF and guaranteed by the DBKL will not go sour just like the accumulated back arrears?
In fact it is well known fact that banks are very wary to extend these housing loans because of the high risk of non repayment or errant transactions happening. That is why for many years Permas and other NGOs have been urging both the state and the federal government to step in to facilitate this process between the financial institutions, the people and the housing developers.
Lastly Permas would like urge the government to act as the guarantor to special housing loans which must be provided by a group of banks who must show their corporate social responsibility by providing low interests bank loans especially to the poor. The government can stipulate such provisions if it is not already in existence.
Banks have to start acting more humanely rather than merely doing public relations stunts to promote itself as a caring financial institution. They should start to sincerely and genuinely contribute to community building by helping the poor to own homes instead of merely accumulating wealth to fatten itself.
We would also like to reiterate our call to the government to reintroduce the “sewa-beli” (rent to buy) scheme which was implemented in the early 1980’s for government housing projects such as the PPR schemes. If DBKL cannot stand as the administrative body for this scheme, then make sure to identify the appropriate government agency or body which can play that role.
Minister Raja Nong Chik, using EPF funds to finance housing loans to the poor is like offering housing loans to the poor at the expense of the rakyat’s EPF savings including the poor who are also EPF contributors!
Tan Jo Hann is the president of Permas
