Investing or buying condos in Kuala Lumpur.
The global credit crunch and the sub-prime crisis in the US has prompted investors to look to new markets and Malaysia is one of many developing Asian countries that appears to be benefiting from investment dollars that would likely have gone elsewhere – if not for the fears of a looming recession in the United States and western Europe. The threat of a continuing, long-term downturn stateside could mean Malaysia, and Kuala Lumpur real estate in particular, can expect this extra attention to last for some time yet.
The price of land in KL is high and shows no sign of slowing down so an increasing number of property developers with land banks in good locations are opting to develop high rise luxurious condominium projects. The selling price of such developments can be as much as RM2000-00 per square feet or more in Kuala Lumpur depending on design, specifications and location. Kuala Lumpur City Centre (KLCC), Ampang, Bangsar, Brickfields, and Mont Kiara have all enjoyed strong appreciation and are in demand among the city’s ex-pat community. Another promising area is Jalan Ceylon – the site of a new luxury condominium project by property developer Starpuri Development. The $87 million condominium is expected to be completed by December of 2010 after a 32 month build.
Financing is available for foreign investors once potential purchasers show proof of possessing some source of income to enable repayment. For foreigners, the maximum loan normally allowed is 80 per cent and the term of loan depends on the age of the purchaser. Those looking to buy a condominium in Kuala Lumpur are currently looking at a range of between US$ 66,000 and US$ 250,000 for mid-range units.
The fortunes of the companies responsible for KL’s recent developments have differed widely, in line largely with their targeted market area. Those with a focus on high-end segment such as IGB Corp Bhd, Sunrise Bhd and E&O Property Development Bhd have seen significant earnings growth this year, while the ones with focus on the mass market, such as MK Land Holdings Bhd and LBS Bina Group Bhd, have seen earnings down sharply due to poor sales. The recent history of these companies is a clear demonstration of the shift occurring in the city’s market at present.
How Financial Institutions Assess Your Credit Rating For Home Loan Applications
Financial institutions in Malaysia generally assess the credit rating of potential borrowers through the Central Credit Reference Information System (CCRIS) and Credit Tip Off Service (CTOS) or similar type of bankruptcy search.
CCRIS
A majority of financial institutions report to the Credit Bureau at Bank Negara Malaysia (BNM) monthly on all their loans. CCRIS is a computerised database system that stores information reported to the Credit Bureau. CCRIS currently contains credit information on about 5 million borrowers in Malaysia. CCRIS processes the credit data received from the financial institutions and summarises the information into credit reports, which can be made available to the financial institutions upon request.
Your CCRIS report shows your total principal, interest and charges outstanding on each of your loans including your housing loans, personal loans, credit cards, car hire purchase and overdrafts. It also shows the number of months your payments are in arrears on a monthly basis for one year. A CCRIS report also shows other loans you have applied for as well as brief information on summonses or bankruptcy petitions if any.
Financial institutions assess your credit rating by analysing each debt item, looking at your loan balances and trends in your repayments track records. In general financial institutions will either reject or query debt repayments in arrears of more than 2 months. Some financial institutions are stricter than others. Financial institutions will also use existing debt and debt application balances in the CCRIS report to estimate how much total debt commitments you have or are likely to have and the likely total monthly debt servicing amount. This information is used to calculate your debt service ratio. In general, financial institutions will reject or query a total debt service ratio of 50% of your monthly income.
You can obtain your own credit report by visiting BNMLINK at:
Ground Floor, D Block, Jalan Dato’ Onn, Kuala Lumpur.
Tel: 1-300-88-5465 (1-300-88-LINK) (Overseas: 603-2174-1717)
Fax: 603-2174-1515 E-mail: bnmtelelink@ bnm.gov.my
For more information on CCRIS go to http://creditbureau.bnm.gov.my.
CTOS or similar bankruptcy searches
CTOS Sdn. Bhd. and other similar organisations, collate public information usually from national newspapers on bankruptcy and summons information of individuals and companies into an electronic database.
Bankruptcy information include information of individuals and companies petitioned, declared, released or deceased bankrupt. Bankruptcy reports usually provide information such as the Court filing number, the location, the date of the Notice or order, the name of the individual, the identification card number and, in the case of petitions, the date of the court hearing.
Summons information usually include details of individuals and companies where substituted service of a summons has been issued, the Court filing number, the location of the filing, the date of the Notice or order, the name of the individual or company , the amount of the summons (if available), the identification number of the individual or company (if available) and the date of the court hearing.
You can currently obtain your CTOS report free from:
CTOS Sdn Bhd (209649-U)
Unit A-8-4, 8th Floor, Megan Avenue 1,
No 189, Jalan Tun Razak, 50400 Kuala Lumpur,
Malaysia
Tel: 603-2770 8833 Fax: 603-2770 8834
Website: www.ctos.com.my
You can also enquire with the Jabatan Insolvensi Malaysia on your bankruptcy status. The department recently launched e-insolvency. The purpose of e-Insolvency is to facilitate individuals in checking their bankruptcy status and company’s liquidation status via the Internet through the e-Insolvency portals. An individual can perform a search through appointed agents such as www.myeg.com.my, www.e-services.com.my or www.rilek.com.my.
For more information see http://www.bheuu.gov.my/jim/index.shtml.
Customer enquiry Information from your CCRIS and CTOS statements are often analysed at the start of your loan application. Your loan officer will usually enquire with you to clarify on any negative results in your loan accounts reflected in the reports. It may be a good idea to consolidate your debt or at least have a plan for debt consolidation prior to your application for a home loan. The loan officer would likely want to see that you are making an effort to ensuring that you can pay your debts as and when they fall due and maintaining a good credit rating in the long run.
Are You First Time Home Buyer?
Basic Knowledge for First Time Home Buyer
TITLES
There are two categories of titles
Freehold – which gives the owner perpetual ownership;
Leasehold – which allows the owner to stay in possession only for a specified period. When the specified period ends, ownership reverts back to the authority which issued the title.
Generally, a house is issued a title for the piece of land on which the house is erected; and an apartment is issued a strata title for the specific area on the specific floor of the building in which the apartment or condominium is located. A search can be done at the relevant land offices or registries to determine whether the title is encumbered. If the title has not been issued, a search can be done on the master title on which the whole or part of the housing project is erected.
DOCUMENTATION AND PROCEDURES
All purchases direct from housing developers must use the Schedule G (for purchases of houses) or the Schedule H (for purchases of apartment respectively of the Housing Developers (Control and Licensing) Act 1996 as the sale and purchase agreements. Payment of the purchase price the said Schedules G and H is by progressive payment based on completion of work as certified by the architects. Payment of the last 5% of the purchase price will be held by a firm of solicitors as stakeholders for the defect liability period, which is currently 18 months from the delivery of vacant possession.
There are no fixed rules on the form of agreement for purchases from existing house owners (more commonly called sub-sale). However, it is common practice that upon signing of the sale and purchase agreement 10% of the purchase price be paid to the seller, and the purchaser be given 3 months to pay the balance of purchase price with an extension of 1 month if he fails to do so within the first 3 months’ period. Interest at the rate of 10% per annum calculated on a daily basis is normally charged for the extension period. Payment of the balance of purchase price is usually made to the solicitors acting for the seller as stakeholders to ensure redemption of the house (if the same is still charged or assigned to a bank or financial institution at the time of sale) and payment of real property gains tax by the seller.
Other than the sale and purchase agreement, a memorandum of transfer, which is Form 14A of the National Land Code 1965, must be completed to transfer the title from the seller to the purchase. In instances where the title has not been issued, then if the purchase is from a developer, the developer will undertake in the sale and purchase agreement to transfer the title when the same is issued; and if the purchase is through a sub-sale, the transfer will be through an assignment of the sale and purchase agreement between the developer and the seller (Principal SPA) to enable the buyer to take benefit of the developer’s undertaking to transfer the title contained in Principal SPA.
STAMP DUTY
Stamp duty is levied on the document of transfer (i.e. the memorandum of transfer if the title has been issued, or the deed of assignment of Principal SPA if the title has not been issued) based on the purchase price as follows:
a. 1% on the first RM100,000.00
b. 2% on the next RM400,000.00
c. 3% on the next RM1,500,000.00 and
d. 4% on the remainder
(item 32 [a] of the Stamp Act 1949)
LEGAL FEES
The first Schedule of the Solicitors Remuneration Order 1991 sets out the fees to be collected by lawyers for work done in handling the sale or purchase of house based on the purchase price as follows:
1% on the first RM150,000.00
0.7% on the next RM850,000
0.6% on the next RM2,000,000
0.5% on the next RM2,000,000
0.4% on the next RM2,000,000
OTHER FEES
Stamping fee( per document) RM10
Adjudication fee RM10
Search fee RM60
Registration fee RM100
For each sale and purchase of a house, the solicitors concerned can only collect fees based on the above scale from either the seller or the purchaser and not from both of them.
FINANCING
Mortgages : Loans of 90% of the purchase price are usually available. Current Base Lending Rate 6.75% per annum; loans are available up to a period of 30 years