Minister defends scheme to lend EPF money to unqualified home buyers

February 03, 2012

KUALA LUMPUR, Feb 3 — The government was forced today to allay fears that RM1.5 billion from the Employees Provident Fund (EPF) would be lost in a scheme offering home loans to those who cannot qualify for bank financing.

Federal Territories and Urban Well-being Minister Raja Datuk Nong Chik Raja Zainal Abidin gave a guarantee today that the government would safeguard EPF’s interests, saying the deal ensured secure financial returns for the EPF.

He had recently said EPF funds will be used to help some 20,000 people who are still renting in the city to buy homes under the Federal Territories Foundation.

“To EPF, this is a secured business transaction, a secured loan, it is more secured than other corporate land property which is guaranteed by a government agency — the DBKL (Kuala Lumpur City Hall.)

“The EPF is well protected. Its gets 5.5 per cent clean returns (per year). The EPF gets to kill two birds with one stone, secured returns and at the same time helping the needy,” the minister said during a special briefing for the media as well as representatives of potential loan recipients.

“It is an education process, we are teaching people to become more responsible. The people who are taking this loan are using other rakyat’s money, not the government’s money,” he added.

Raja Nong Chik (picture) said the government had approached a few potential funders before announcing the project, and that it was the EPF’s management that “came forward” to offer to fund the home loan scheme.

But he did not explain why the government did not use its own funds for the loan scheme, saying that the RM1.5 billion would be drawn out from the EPF “in stages.”

Raja Nong Chik said the home loan, known as Skim Pembiayaan Khas penjualan program perumahan rakyat (PPR) Majlis Tindakan Ekonomi Negara dan perumahan awam DBKL (PA DBKL) (the National Economic Action Council’s special loan scheme for people housing programmes and DBKL local housing) was meant for those who had already been renting low-cost homes from DBKL.

Those who have failed to pay rent to DBKL will not be allowed to apply for the loan.

Under the scheme, applicants will receive a 100 per cent loan, with a repayment period of up to 25 years to allow loan borrowers to make “smaller” monthly repayments.

The qualifying age to apply for the loan is 18 years and above. However there will be no maximum age limit if the application for the loan is done through a co-borrower. Insurance and legal fees pertaining to the home purchase can be included as part of the loan.

Raja Nong Chik said a special purpose vehicle (SPV) called Syarikat Perumahan Wilayah Persekutuan (SPWP) had been created to manage this new project, under the Yayasan Wilayah Persekutuan.

Under the deal, the EPF earns 5.5 per cent interest per annum in repayments made by every home owner.

DBKL has also given an assurance that it will buy back the homes of those who do not repay the loan, and sell it to the 27,000 people who are currently on the waiting list to purchase the homes.

“DBKL will create a redemption reserve account to ensure that DBKL always has funds to buy back the homes which buyers have failed to pay back.

“The reserve account will be 20 per cent from the total sales of homes under this scheme. This fund cannot be used by DBKL other than the stated purpose,” said Yayasan Wilayah Persekutuan executive director Datuk Idris Mohd Isa.

He said a roadshow will be held in March to explain the new scheme in detail to stakeholders, and that the first phase of the scheme can begin by May.

Federation of Malaysan Consumers Association (Fomca) CEO Datuk Paul Selva Raj, who was present during the briefing, said the government needed to ensure that everything was done in a professional manner.

“The loan is (only) to be given to people who can afford to pay (back),” he said.

The opposition DAP has labelled the proposed scheme an abuse of public funds for political reasons.

“We have no ulterior motive like how some people on the Internet have been saying. We want to help the people. I understand their problems,” said Raja Nong Chik in response today.

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