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‘Banks should be stricter with new developments’

KUALA LUMPUR (Feb 13): Banks should conduct tighter checks and commission their own independent feasibility studies on developers’ proposed projects before deciding to grant financing, says property consulting firm Rahim & Co International Sdn Bhd.

While banks are already conducting feasibility studies via the appointment of consultants, Rahim & Co research director Sulaiman Akhmady Mohd Saheh said the independence of these studies should be looked into.

“Currently, banks already require feasibility studies, [but] how it works is the bank would instruct the borrower — the developer — to appoint [an] independent consultant, who will advise the borrower rather than the bank. I think there has to be a balance. The banks also need to conduct their own studies and appoint their own consultants to get a more independent view of a proposed project, and not just consider things from the borrowers’ perspective,” said Sulaiman.

He went on to say that while the firm lauds the government’s move to curb incoming supply via the luxury project freeze it announced last year and spur the market to absorb existing supply in the pipeline, he said not all new projects should be blocked.

“If they were to apply a blanket ban on all developments, it may affect the EPPs (entry-point projects). Certain retail developments, despite the tough market, are still doing well due to their management and tenancy mix, which play a big role as well,” he said.

“While we applaud the move to control new supply, we have to also consider how the market will be absorbing existing and incoming supplies,” added Sulaiman.

To Rahim & Co real estate agency director Robert Ang, having banks do more stringent feasibility studies before granting financing is a better move than freezing projects.

“In my opinion, freezing is never a good thing to do. What they should have done is to employ other measures and have banks do more stringent feasibility studies. If I am a developer and I have the capacity for a new project, I should be allowed to proceed,” said Ang.

Sulaiman and Ang were speaking during a press conference following the release of Rahim & Co’s Property Market Review 2017/2018 report yesterday.

This article first appeared in The Edge Financial Daily, on Feb 13, 2018.

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