Developer loan interest rate may be capped at 6pc

Noh OmarPETALING JAYA: The government may set a maximum loan interest of six per cent for housing loans dispensed by developers, The Star Online reported today.

According to the report, Urban Wellbeing, Housing and Local Government Minister Noh Omar said the ministry was still getting feedback on an acceptable loan interest rate.

However, based on early feedback, Noh said he believed developers should impose an interest rate of up to six per cent only.

He said under the Moneylenders Act, money lenders could charge a maximum of 18 per cent interest rate without collateral or 12 per cent with collateral. However, the interest rate for this housing loan would be decided by him.

He explained that under the law, the minister had the power to decide what was an acceptable interest rate, and loan repayment period. He lamented that the media and the public kept highlighting the maximum allowable interest rate.

Noh stressed that the loans issued by developers would only be to help house buyers cover the balance on a bank loan.

“Generally, the bank will not give 100 per cent loan to house buyers. Usually it is 70 per cent or 80 per cent.”

“Where do the house buyers get the remaining 20 per cent or 30 per cent? They borrow from their relatives, families, friends, or take personal loans.”

He also said he believed developers with moneylending licences were not seeking profit from interest, but were helping to sell their properties with loans to assist house buyers cover the initial deposit fees.

Recently, Noh had come under fire after he announced that developers would be allowed to apply for moneylending licences so they could issue loans to house buyers.

His announcement received flak from consumer associations and politicians, including those from his own party, Umno, who feared a lack of protection for house buyers would see them trapped in long and expensive loans.