The Bank Negara may soon impose curbs on the Developer Interest-Bearing Scheme (DIBS), an easy financing package offered by developers in joint-promotion activities with banks.
Once this happens, future primary sales would be negatively affected, said Hong Leong Investment Bank (HLIB), adding that the curbs could be rolled out ‘later this week.’
“While the exact measures are yet to be revealed, we believe the curbs would impact this easy financing scheme,” noted HLIB.
Under the scheme, buyers pay less initial payment for their property purchases as developers absorb the initial interest until the units are delivered. Most of those that avail this scheme have intentions to flip the property upon possession to make extra cash even with less capital. This scenario fuels speculation.
According to a property consultant, “Typically, under the scheme, buyers only foot between five percent and 10 percent of the house price upon signing the sale and purchase (S&P) agreement and only begin payment when the project is completed.”
“There are caveats to this scheme, as buyers commit to a financial obligation upon the signing of the S&P and the interest cost has actually been already passed on to buyers via the higher selling prices.”
Property consultants also argue that the DIBS puts prices at a higher artificial trajectory. The recent slew of sales in the primary market has been attributed to the attractive DIBS scheme, leaving the secondary property market in a laggard movement.
Moreover, putting limits to the scheme also supports the government’s aim to stop the persistently growing household debt.
“In the recent past, Bank Negara has been compiling information on the scheme and studying its impact on the sector,” a source said.
Once this happens, future primary sales would be negatively affected, said Hong Leong Investment Bank (HLIB), adding that the curbs could be rolled out ‘later this week.’
“While the exact measures are yet to be revealed, we believe the curbs would impact this easy financing scheme,” noted HLIB.
Under the scheme, buyers pay less initial payment for their property purchases as developers absorb the initial interest until the units are delivered. Most of those that avail this scheme have intentions to flip the property upon possession to make extra cash even with less capital. This scenario fuels speculation.
According to a property consultant, “Typically, under the scheme, buyers only foot between five percent and 10 percent of the house price upon signing the sale and purchase (S&P) agreement and only begin payment when the project is completed.”
“There are caveats to this scheme, as buyers commit to a financial obligation upon the signing of the S&P and the interest cost has actually been already passed on to buyers via the higher selling prices.”
Property consultants also argue that the DIBS puts prices at a higher artificial trajectory. The recent slew of sales in the primary market has been attributed to the attractive DIBS scheme, leaving the secondary property market in a laggard movement.
Moreover, putting limits to the scheme also supports the government’s aim to stop the persistently growing household debt.
“In the recent past, Bank Negara has been compiling information on the scheme and studying its impact on the sector,” a source said.
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