KUALA LUMPUR (Feb 8, 2012): The Employees Provident Fund (EPF) today reassured members that the special funding scheme for public housing programmes does not involve EPF providing loans to individuals.
EPF deputy CEO and Head of Investment Datuk Shahril Ridza Ridzuan clarified that the loans are to be provided to the federal government through a special purpose vehicle (SPV) set up under the Federal Territory Foundation.
Terms of the agreement which are currently being finalised essentially entail an initial facility of RM300 million, with any further loans to be granted at the discretion of the EPF Investment Panel, he said in a statement.
He added that the approval of further loans will also be subjected to satisfactory performance of the account, to be reviewed after 12 months from the date of the last drawdown of the RM300 million.
The terms of the loan agreement are within the risk appetite of the EPF as it is secured against assets and cash flow with a suitable guarantee on repayment of the loan made, said Shahril, who explained conditions imposed to protect the interests of EPF contributors.
Federal Territories and Urban Well-Being Minister Datuk Raja Nong Chik Raja Zainal Abidin had on Jan 30 announced that the EPF will give a RM1.5 billion loan to the Federal Territories Foundation (FT Foundation) to fund 44,146 housing units under the National Economic Action Councils People Housing Programme as well as Kuala Lumpur City Hall (DBKL) public housing.
Raja Nong Chik said the loan will be disbursed through Syarikat Perumahan Wilayah Persekutuan, the SPV set up to assist eligible buyers who are unable to obtain loans from banks due to their credit background.
His announcement had sparked concerns that workers savings were being put at stake, as the loans were generally perceived to be high-risk.
In assuring the public that this is not so, Shahril said 25% of the loans disbursed must be set aside in a liquidity reserve account assigned to the EPF, together with the assignment of all cash flow.
The EPF has also requested that the FT Foundation engage a suitable financial institution to manage the credit administration of the scheme to ensure good conduct of the individual accounts, he added.
Based on the terms and the security arrangements that we have put forth, the EPF is well protected and the annual 5.5% profit rate imposed on the loan is fair, he added.
In PUTRAJAYA, Raja Nong Chik gave an assurance that the scheme will not lead to a subprime crisis – a United States financial crisis arising from subprime housing loans between 2006 and 2008, which resulted in US$250 billion losses.
The scheme is different from the subprime as it does not involve any elements of speculation, he told a press conference at his office.
In subprime, the mortgages were sold in secondary level but there is only one level of transaction involved here, he said, adding that the RM1.5 billion fund will not cause a financial crisis in the country because it only reflects less than 1% of the countrys housing loan portfolio.
Raja Nong Chik said the value of the property is also doubled or higher and there is a buy back guarantee from DBKL is the loans are not paid back.
It is secured in terms of the conditions. Everyone is secured. The EPF is very professional and it has placed steep conditions so it will not lead to any financial crisis, he stressed.
Raja Nong Chik also explained that the RM1.5 billion fund will only be completely used if all the 44,146 units are taken up by the buyers.
He said at present, there are only 24,126 people who have been offered the letter to purchase the houses.
The scheme is done in two batches where the first batch involves 6,378 buyers who have signed the agreement to purchase housing units, which will cost about RM200 million-RM300 million.
The second batch will involve about 12,675 people, which will cost about RM400 million.
About 4,964 people have already purchased the units on their own either by paying it cash or they have secured a loan from the bank, he said adding that the remainder have not expressed interest in purchasing the units.
When asked if those who default the loans will be evicted, Raja Nong Chik said yes, as they are no longer under the rental basis.
They have been given a privilege, so they have to be responsible. There are 30,000 people in waiting list who are qualified, so we are firm because we have to instil financial discipline. I am confident they will pay up, he said.
Yesterday, several Pakatan Rakyat MPs submitted a memorandum urging EPF to reconsider its decision to provide a RM1.5 billion loan for the scheme.
All the speculations would not have arisen if the minister had clarified that EPF is not in the business to do retail lending to individuals, said Kuala Selangor MP from PAS Dr Dzulkefly Ahmad after meeting Shahril.
Meanwhile PKR vice president Nurul Izzah Anwar refuted claims that the Pakatan Rakyat was against a move to help low-income groups to become house owners.
But there are other ways to assist them without using funds saved by workers, said Nurul Izzah who lauded the opportunity to meet with EPF over the matter.