BUTTERWORTH: The Penang government will not approve housing projects from developers who lend money to buyers at a higher interest rate than the banks.
Penang Says No To Higher Interest Rate Share on XChief Minister Lim Guan Eng said his administration does not agree with such a proposal as the suggestion will increase the people’s hardship.
He said some borrowers face difficulties in repaying housing loans based on the 6% interest rate and feared an 18% interest rate will be too much to bear and may result in bankruptcies.
Guan Eng said he will instruct the Penang Island City Council and Seberang Prai Municipal Council to turn down applications where high interest rates are imposed on home buyers.
“The federal government may have meant well by coming up with the proposal but this is not the way forward to fund homes for people.
“This is not in the best interest of house buyers,” he said at a press conference after launching a zero-waste program at Taman Bagan Lalang today.
The proposal for housing developers to be allowed to lend money to purchasers was mooted by Urban Wellbeing, Housing and Local Government Minister Tan Sri Noh Omar last week at the 19th National Housing and Property Summit 2016.
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The proposed interest rate for the loan taken under the scheme reportedly varies from a maximum of 12% with collateral and up to 18% without collateral.
In a related development, prominent Penang activist Lim Mah Hui said the proposal was fraught with risks and listed conflict of interest as one such hazard.
He said developers want to sell as many units as possible, thus are incentivised to provide financing to the products they sell but they do not have the expertise to do due diligence and credit analysis.
The former economist instead urged local and state governments to introduce policies that discourage building expensive houses.
He said several public housing schemes like subsidised rentals, public housing, rent with option to own and private-state shared ownership should be explored and implemented.
“The last thing for the government to do is to encourage more speculation and unsustainable property market growth by allowing developers to become lenders,” the Penang Island City Council councilor said in a statement.
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