By Khairie Hisyam
Will Bank Negara follow in Singapore’s footsteps and ban the popular developer interest-bearing scheme (DIBS)? That is the question of the day for property industry players, after reports surfaced today that Bank Negara is studying risks associated with DIBS and may be mulling curbing measures.
A banking source informed KiniBiz that Bank Negara has actually been looking into the matter since around 2009. However, Bank Negara has yet to respond to KiniBiz queries at press time.
Should any curbs — or even an outright ban — arise from this development, Bank Negara is likely to focus on the banks and lending institutions.
“Usually the developers have (some sort of) deal with the banks on DIBS and that’s why not all banks participate in the DIBS scheme. I guess that’s where Bank Negara’s power lies — they can (impose) control on the deals done between the developers and the banks,” said Khairul Anuar, a property lawyer.
Surprise and caution from developers
KiniBiz received mixed reactions when contacting various parties over the matter today. The news came as a surprise to the Real Estate and Housing Developers’ Association (REHDA).
“I don’t know where it came from (since) we have not heard,” said Michael Yam, REHDA president. “My first immediate response would be that I think Bank Negara should engage and consult with stakeholders to understand better how DIBS came about, its benefits and its pitfalls.”
“If you use it in good faith, basically to ease the burden of homebuyers, in my opinion DIBS is a good product.”
Yam’s sentiments are echoed by another developer KiniBiz spoke to, who is hoping that any measures implemented will take industry feedback and market conditions into account.
‘Curbs would be welcome’
Others were more welcoming of any potential curbs on DIBS, criticising various perceived flaws of the scheme.
One is the dangerous illusion of affordability to the regular homebuyer, said Ernest Cheong, senior partner of Ernest Cheong PTL Chartered Surveyors.
“DIBS is very innovative on the developers’ part, but potentially very dangerous to Malaysians, especially young couples,” said Cheong. “The danger of DIBS is that they are tricked into thinking they can afford it while they really can’t.”
Another is that DIBS fuels speculation in the market and drives property prices upwards by creating artificial demand due to easy market entry, says Professor Dr Ting Kien Hwa of Universiti Teknologi MARA (UiTM).
“A ban on DIBS is good as it will remove one of the root causes of high property prices,” said Ting who heads UiTM’s Centre for Real Estate Research.
However, Yam of REHDA disputed the argument, saying that speculative activities will always be present with or without DIBS.
“It is mainly a factor in cost — the main reasons are the land prices, material prices, labour costs, interest costs and compliance costs as well as building low-cost houses, giving bumiputera discounts, making allowances for community halls etc…who bears the cost?” said Yam rhetorically.
On the criticism that DIBS creates artificial demand, Yam added that DIBS is not a global thing and not many developers actually offer DIBS and that the situation is not as rampant as it is made out to be. “Let’s do a bit more research and look at both benefits and pitfalls.”
“Don’t throw the baby together with the bathwater,” said Yam, stressing that DIBS on the whole remains a good product to help genuine house-buyers.
Investors in a frenzy?
On the other hand, a market observer opined that while curbing measures would hurt and be unpopular, they are necessary on the authorities’ part given the current frenzy among the masses over property investment.
“Everybody feels negatively the economy but despite that there are still a lot of people entering property investment without proper strategies and plans,” said the observer. “DIBS makes it easy to enter and personally I feel that when it’s too easy to enter, there is something wrong.”
The observer, speaking anonymously, further commented that many aspiring investors take on a property commitment for investment while barely earning enough to eat, and often do not even budget for their commitment in their monthly expenditure due to DIBS.
“Investors today need a reality check (that investment has a cost) and this would be a reality check.”
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