Moneylender developer plan needs careful study

epa05528249 Builders work on a construction site of a new condominium building in Bangkok, Thailand, 07 September 2016. The construction sector in Thailand is expected to continue stable growth after it soared in 2015 experiencing double digit record growth with a rising demand for housing and a continuing stable political climate prevails. The government continues to take measures to attract increased investment in Thailand and push ahead with large public infrastructure programs. EPA/BARBARA WALTON

TAN Sri Noh Omar surprised many of us when he announced on Thurs­day that his Urban Wellbeing, Housing and Local Government Mi­­nistry plans to issue money­lender licences to eligible housing develo­pers so that these companies can provide loans to their customers.

This proposal targets developers with deep pockets and house buyers who have trouble getting bank loans.

The minister called this a win-win solution, pointing out that the developers can gain from property sales as well as end-financing schemes, while the country’s pool of potential homeowners will be wi­­dened.

This is an unconventional and unexpected idea. Developers find land, create products on this land and sell these products. That’s what they do.

And if those buying the products need help to pay the developers, they turn to financial institutions. That’s how things have been for many years.

The notion that developers in Ma­lay­sia can now go into the money­­­lending business as a way to boost sales, has naturally generated a spectrum of reactions.

On one end, there is much enthusiasm for the proposal, based on the belief that such a move will indeed be a boon for the property market and will help more people to own a roof over their heads. Those are certainly desirable outcomes.

Sitting at the other end are those who fear the unintended consequences. They are sensitive to the fact that good intentions do not guarantee good results.

Fresh in their memories is the sub-prime mortgage crisis in the United States less than a decade ago, when a dangerous cocktail of easy credit conditions, speculation, greed, weak regulatory oversight and short-sightedness caused a financial hangover of global proportions.

Of course, bunched up in the middle of the spectrum are people who are eager to see details of the proposal.

This is a matter that warrants a wait-and-see approach. The property sector is not just about the business of buying and selling real estate. It is closely linked to other industries such as construction, banking, building materials, infrastructure and manpower.

In fact, the health of the property market is a reliable indicator of the national economy. And let us not forget that property development has an impact on society and the environment.

Therefore, when addressing the challenges of selling property and buying homes, we must resist the temptation to opt for quick fixes and unsustainable solutions.

We need to be assured that if the developers are to be licensed to lend money, this is done only after diligent study and robust consultation with stakeholders tell us that it will do far more good than harm.