By Khairie Hisyam
On the surface, developer interest-bearing scheme (DIBS) appears well-meaning despite the side effects on the market. But as with election promises, those blowing their own trumpets and pieces of meat suspiciously lying around on the jungle floor, Tiger is sceptical about it and wonders if the scheme really is a good idea in the first place.
Tiger doesn’t like walls, mostly because Tiger enjoys ranging around his territory in the property jungle freely. But Tiger understands the attraction of owning your own enclosed space with a patch of grass on the side. After all, constantly having to mark your territory in the usual way can get tedious.
Not to mention all the trespassers who keep accidentally dropping their bear traps. Tiger doesn’t understand why so many people carry so many bear traps around the jungle.
Anyway, many people dream of owning their own homes and DIBS ostensibly helps them to. To be fair, maybe it does. Cough up the down payment and you have no further financial burden from the purchase until the developer completes your spanking new house, because the developer pays the interest until you get the keys.
That might even motivate the developers to work faster, right? The faster they build your house, the less they have to pay. During that period you only have to worry about paying your monthly rent or your current home’s instalments.
But it sounds too good to be true to Tiger. The property industry, like any other business environment, comes down to maximising profit.
According to birds chirping in Tiger’s ears, the days of 30–40% profit margins are gone for the developers. If developers actually bear these interest costs then the profit margins will drop further. How will they survive under the pressure for continuous profit growth?
It only makes sense that the ‘borne’ interest costs are actually priced into the house prices. And that raises transparency questions. Why is DIBS called ‘incentive’ without informing the buyer that the ‘free’ cost has been priced in?
Like a salesperson offering discounts after quietly marking up the price, is that not cheating?
In the end this also leads to unnatural inflation of prices. Instead of supply and demand, cost and profits are at work as new launches benchmark on marked-up prices. There are also those who take advantage of the scheme — along with its cousin the ‘rebate’— to bet on future appreciation on relatively little or even zero outlay, essentially speculating.
And who is the ultimate loser in this whole chain?
The genuine house buyer, of course, who ends up paying more of their hard-earned money than they should be.
Despite its apparently well-meaning intentions, the fact DIBS causes these things alone makes it wrong. It is open to abuse and indeed has been terribly abused.
Tiger has also heard some chirping that instead of an outright ban, addressing the abuse and flaws of the scheme is the way forward. DIBS is beneficial to those who really need it, so why deny them this scheme because of some rotten apples?
Well, Tiger doesn’t like apples, let alone rotten ones.
But coming back to the issue, regulating the scheme’s implementation is tricky. Maybe we can create a national register of people owning properties to restrict DIBS to first-time buyers or upgraders, but then what would stop the speculators from asking trusted family members who ‘qualify’ to hold properties on their behalf?
Tiger is sure that there are plenty of other possible solutions that can be put forward to stop the abuse. But Tiger also feels that trying to address every possible loophole that has been and will be discovered is a slippery slope for the authorities — in the end, Tiger doesn’t know if the potentially snowballing trouble is worth it.
Additionally, the old saying about living within one’s means come to mind. DIBS becomes a crutch to make home purchasing appear easier and less burdening while in fact it translates into a higher price in the long run. Essentially, it entices people to exceed their financial capabilities.
If a consumer wants a product that he cannot afford financially, is it responsible to let him have it anyway despite knowing that he would end up paying an even higher price? Of course not. If one cannot afford something, it’s easier to find comparable products that offer lower prices.
After all, the worrying household debt levels in Malaysia at the moment is a testament that the old wisdom on prudent financials is not yet wholly embraced on our shores. By all accounts DIBS stands in the way of that. So was DIBS even a good idea at all?
Put simply, the easiest way to stamp out the risks is by chasing DIBS out of the Malaysian property jungle. It is, to Tiger, the morally right thing to do.
But is there enough will to ban DIBS outright? After about four years of studying the risks, Tiger hopes Bank Negara sees how the dangers of the scheme outweigh its benefits, if any.
At the end of the day, ‘window dressing’ curbs will not be enough — human ingenuity is like water, always finding a way around rocks. And that would be bad news for those dreaming of owning their own homes.
Grrrrrrrr!
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