TYCOON TONG’S FUNDMYHOME ATTRACTS INTEREST – BUT BUYERS ARE SLOW TO CONVINCE

FIRST-TIME homebuyer, Ng Chiao Lyn, is one of the millions of Malaysians targeted as beneficiary of the newly launched FundMyHome scheme, which promises a new way to own a home with no monthly repayments.

But the 24-year-old flight stewardess, who has just paid a down payment for a traditional 30-year mortgage for a condominium unit in Segambut, Kuala Lumpur, is not convinced the scheme will benefit her in the long term.

“What’s the difference between renting a house at RM800 for five years and this scheme?”   Ng said.

“This scheme appears to require me to make larger payments once the home is refinanced after five years. The scheme doesn’t seem worth it to me.”

Under the private-sector initiative, buyers put down 20% of the property’s price, while the balance 80% is contributed by Maybank and CIMB, which share the returns from the future value of the homes.

The 20% contributed by homebuyers is placed in a trust account and used to pay off the 5% annual investment return to the participating institutions over a five-year period, after which buyers would have equity worth 20% of the property.

The buyer can then choose to sell the home, buy out the remaining portion of the property at market value or refinance the home either via FundMyHome or a normal mortgage.

FundMyHome is also offering about 1,000 units priced up to RM500,000 provided by nine established developers – Eco World Development Group Bhd, IJM Land Bhd, IOI Properties Group Bhd, Mah Sing Group Bhd, Selangor State Development Corp (PKNS), PNB Development Sdn Bhd, Sunway Bhd, Trinity Group Sdn Bhd and UEM Sunrise Bhd.

While the project is aimed at reducing the financial burden of first-time buyers, representatives from civil and property groups expressed concern that the initiative is largely untested and that low-income homebuyers may face high risk exposure.

“You will profit only on the 20% as you do not own the 80%,”   said former Real Estate and Housing Developers’ Association (Rehda) chairman Ng Sieng Liong.

“You can stay in the house for free for five years and take the risk of valuation after five years.”

Prime Minister Dr Mahathir Mohamad (seated), who launched the EdgeProp’s FundMyHome initiative in Semenyih, Selangor, on November 4, has not endorsed the peer-to-peer lending scheme. – The Malaysian Insight file pic, November 15, 2018.

Present Rehda chairman Jeffrey Ng Tiong Lip also warned of the unpredictable property market in the next five years, adding that home owners could risk losing their 20% down payment.

“The question remains if the target groups will be able to meaningfully participate,” Ng told a business forum in Kuala Lumpur yesterday.

Ng questioned whether the M40 (middle 40%) and B40 (bottom 40) household income groups could benefit from the scheme, adding that the requirement for a 20% down payment was “impossible” given that the present 10% payment was already a “huge hindrance”.

Prime Minister Dr Mahathir Mohamad launched the EdgeProp’s FundMyHome initiative in Semenyih, Selangor, on November 4.

While he described the crowdfunding initiative as a “fantastic scheme”, he stopped short of an endorsement, saying he needed proof that the properties could be sold and there would be investors.

Consumer protection

Federation of Malaysian Consumers Associations (Fomca) CEO Paul Selvaraj called on the government to play a regulatory role over the programme, with consumer protection in mind.

“There was insufficient stakeholder engagement on the programme. The central issue is affordable housing. With the salaries people are currently getting, houses are still unaffordable,” said Paul.

“The emphasis should be on bringing down home prices. Even at 10% (down payment), it’s a big challenge and we can safely say that the market is pretty unpredictable, that there’s a still a chance that you could even lose your most 20% (in this programme).

“For many families, their home purchase is the biggest expenditure they will ever make in their lives and the role of the government is to ensure their interests are taken care of.

“There are so many risks and unknowns, which have yet to be clarified. We need good government oversight.”

In a statement over the weekend, civics group The Agora Society Malaysia said first-time homebuyers intending to stay for more than five years will be worse off, as they do not have full ownership of the property, and their rights as an owner are only fully realised once they have fully paid for the property after the initial five-year period.

“We feel that this scheme was rolled out too hastily and falls remarkably short of its purported priority of providing secure and stable long-term homeownership to aspiring first-time homeowners,” it said.

The group questioned whether the public has been informed of the higher costs of refinancing a property after five years as opposed to a standard mortgage loan.

First-time homeowners need to be able to compare the differences between standard mortgage loans and FundMyHome to make an informed and responsible investment decision.

“We are of the view that the government should be wary of this new housing scheme, as analysis and calculation shows that it does not benefit first-time homeowners in any sense but rather resembles an inferior investment scheme that hedges on future property values.”

THE MALAYSIAN INSIGHT