The Penang government will come down hard on developers who are planning to become moneylenders by providing loans as high as 18 percent interest per annum to home buyers.

Chief Minister Lim Guan Eng said his administration will ban such property developers, and will not allow BN to turn the state into an "Ah Long society". 'Ah Long' is a local euphemism for loan sharks.

He has directed both local councils - Penang Island City Council and Seberang Perai Municipal Council - to reject any development projects by such property developers.

Lim said Penang strongly objects to the proposal by Urban Wellbeing, Housing and Local Government Noh Omar to issue money lending licences to property developers.

Noh was criticised for the proposal but defended it by saying he wanted to give house buyers who cannot get bank loans a choice to borrow from property developers.

“This proposal is to give home buyers a choice; if they cannot get a loan from the bank, they can do so from developers," he had said.

Deputy Prime Minister Ahmad Zahid Hamidi also shot down the proposal by saying it was never discussed in the cabinet, and that Noh would be asked to provide an explanation for his suggestion.

Lim described this as no different from the subprime lending in the United States 10 years ago, which led to the 2007-2009 financial crisis.

He said property developers borrow money at commercial rates from banks and can only lend money to house buyers at up to 18 percent annual interest.

“How many developers can afford to build their own housing projects from internally generated funds without borrowing from banks?” Lim asked in a statement today.

“Lending at such high interest rates to house buyers is a recipe for future disaster because in a year, there will be mass foreclosure and auctions by property developers on house buyers unable to pay at “Ah Long-like’ rates,” added the DAP secretary-general.

Lim urged BN to differentiate clearly the respective roles played by banks and property developers.

He reminded the minister that the role of banks is to lend money responsibly and the role of developers is to build houses.

“Mixing up the two will definitely cause financial crisis and economic collapse as proven by the sub-prime lending crisis in the US."

Lim slammed BN for failing to deliver, and said that the federal government has run out of money due to financial mismanagement.

He also ticked off the failure of the banking system for its inability to assist first-time buyers and the poor to buy public or cheap housing.

“Bank Negara’s strict lending guidelines are explained by the high household debt of more than RM1 trillion, with a household debt to GDP ratio of nearly 90 percent,” Lim noted.

“However, this begs the question why Bank Negara did not direct the banks to lend to first-time house buyers and the poor, when many low-cost and low-medium cost houses are empty because the poor cannot secure bank loans."

Political will

Separately, Selangor executive councillor in charge of housing, Iskandar Samad, said the federal government should replicate Selangor's model for affordable homes.

Instead of placing price controls, the government should impose a requirement on developers to supply affordable homes, according to the size of their development projects, he said.

In Selangor, he said, 30 to 40 percent of homes built in projects that span more than 10 acres must be made "affordable".

He added that local councils also imposed their own rules, including the Petaling Jaya City Council which imposes an even stricter requirement for developers to build affordable homes if their projects span more than five acres.

These affordable homes range from RM42,000 to RM250,000 and are between 650 and 1,000 sq ft, he said.

Some 20,000 affordable homes have been built since the policy was introduced in 2015, he said.

The Selangor Housing and Real Estate Council screens buyers according to monthly household income, to ensure the homes go to those who need them, he said.

"The federal government must have the political will to ensure the lower and middle income community's welfare," he said.