Rehda: Engage industry players on future of DIBS

PETALING JAYA: Bank Negara should seek feedback from industry players and stakeholders before implementing any measures to curb or ban the developer interest bearing scheme (DIBS), said Real Estate and Housing Developers Association Malaysia (Rehda) president Datuk Seri Michael Yam.

“I hope Bank Negara would engage us fairly quickly so we can tell them what the situation is really like,” said Yam, who opposes the curbing of DIBS.

It was reported that Bank Negara is currently studying the risks posed by DIBS and there is a possibility that it may impose curbs on the scheme.

Under DIBS, buyers only need to make the initial down payment on the property they wish to buy, while the developers absorb the initial interest until the property is handed over to the buyer.

Yam explained that DIBS was meant to assist people who are renting and wish to buy a home and those who are upgrading.

“Without DIBS, they would have to service two loans at the same time, or if they are renting, pay the rent and the loan, too,” he said.

On DIBS allegedly being open to abuse, he said there were only isolated cases of such abuse.

“I don’t believe developers will push prices up by 20% to 30% just because DIBS is part of the package. The banks do their own internal valuation and risk management, so they would be asking questions if they think developers are pushing the price up.

“There are already measures put in place to mitigate some of the possible abuse,” he said. Yam argued that banks too participate in the DIBS scheme, which would have to be sanctioned by Bank Negara.

“Banks are required to submit an invoice and inform the buyers how much interest he or she needs to pay. At all times, the buyer is aware of the amount of interest the developer is bearing.

“The developers are prepared to do so because the interest cost during the construction phase is very minimal,” he said.

“Buying a house is such a big investment; smart consumers would and should check the prices of properties in surrounding developments to see if the price they are paying is more or less the same.”

As for allegations that DIBS helps to fuel speculation, Yam said speculation only happens in developments in prime locations with short supply.

“Not everyone takes up DIBS, which is actually implemented by very few developers and offered in very few developments. Such developments tend to be higher end products in urban areas. The rising prices of properties are mostly caused by factors such as inflation, and higher cost of materials and land.”

A spokesman from Mah Sing Group Bhd said before Bank Negara takes any move to impose curbs on DIBS, it should first take into consideration the industry feedback and current market conditions.  

“We cannot comment too much as there has been no announcement but generally, the lending environment is still conducive. Financing liquidity is still attractive, interest rates are still low due to the competitive mortgage space where banks are offering a BLR [base lending rate] of minus 2.4%, from BLR minus 2.1% to 2.2% a year ago.”

C H Williams Talhar & Wong Sdn Bhd’s managing director Foo Gee Jen, however, believes that some measures should be put in place where DIBS is concerned.

“It doesn’t need to be a total ban but what I’d advocate is to educate the public on what DIBS is about and how it works,” he said.

“There’s a perception that DIBS is a very easy payment scheme where the buyers just need to pay a down payment of 5% to 10% and nothing else until their homes are completed. Most buyers are not aware that in terms of price, they are actually paying between 15% and 25% more with DIBS.

“The interest cost has already been factored into the property price. DIBS makes it easier in the sense that there is breathing space of two to three years where the buyer doesn’t have to pay anything. DIBS also encourages speculation.”


This article first appeared in The Edge Financial Daily, on June 28, 2013.