Was DIBS a good idea in the first place?

comments     TigerTalk     Published     Updated

Tiger doesn’t like walls, mostly because Tiger enjoys ranging around his territory in the property jungle freely.

But Tiger understands the attraction of owning your own enclosed space with a patch of grass on the side. After all, constantly having to mark your territory in the usual way can get tedious.

Not to mention all the trespassers who keep accidentally dropping their bear traps. Tiger doesn’t understand why so many people carry so many bear traps around the jungle.

Anyway, many people dream of owning their own homes and the developer interest-bearing scheme (DIBS) ostensibly helps them to. 

To be fair, maybe it does. Cough up the down payment and you have no further financial burden from the purchase until the developer completes your spanking new house, because the developer pays the interest until you get the keys.

That might even motivate the developers to work faster, right? The faster they build your house, the less they have to pay. During that period you only have to worry about paying your monthly rent or your current home’s instalments.

But it sounds too good to be true to Tiger. The property industry, like any other business environment, comes down to maximising profit.

According to birds chirping in Tiger’s ears, the days of 30-40% profit margins are gone for the developers. If developers actually bear these interest costs then the profit margins will drop further. How will they survive under the pressure for continuous profit growth?

It only makes sense that the ‘borne’ interest costs are actually priced into the house prices. And that raises transparency questions.  Why is DIBS called ‘incentive’ without informing the buyer that the ‘free’ cost has been priced in?

Like a salesperson offering discounts after quietly marking up the price, is that not cheating?

In the end this also leads to unnatural inflation of prices. Instead of supply and demand, cost and profits are at work as new launches benchmark on marked-up prices. There are also those who take advantage of the scheme - along with its cousin the ‘rebate’- to bet on future appreciation on relatively little or even zero outlay, essentially speculating.

Go to KiniBiz for more .

This TigerTalk article was written by Khairie Hisyam.

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