KUALA LUMPUR, March 17 — Pakatan Rakyat (PR) lawmakers are questioning the rationale behind using RM1.5 billion from Malaysia’s largest pension fund to finance Kuala Lumpur City Hall’s (DBKL) low-cost housing schemes, and whether it is to liquidate the capital city’s assets.
Noting that Putrajaya has yet to clarify the matter, they also flayed Federal Territories and Urban Well-being Minister Raja Datuk Nong Chik Raja Zainal Abidin for saying that prospective buyers who did not qualify for bank loans would have no problems repaying loans from the Employees Provident Fund (EPF) at a 6.5 per cent interest rate.
“My fear is that EPF is being used as a last resort, as the government’s personal piggy bank.
“There is concern ... that the EPF funds are being used as a source to finance new projects and this scheme will be used to unlock illiquid assets,” PKR vice-president Nurul Izzah Anwar told The Malaysian Insider.
Illiquid assets are assets that are not easily and quickly converted into money, and also cannot be easily sold without a substantial loss in value.
“There has been no detailed explanation on this. Will the use of EPF funds become a precedent in the government financing efforts to unlock other illiquid assets?” the Lembah Pantai MP asked.
DAP publicity secretary Tony Pua stressed that the responsibility of building low-cost houses should fall under the purview of the federal government using federal funds instead of EPF money.
“Why must the taxpayers’ retirement funds be tapped? What has happened to the taxes we have paid to the government? Is the federal government so bankrupt now that they can’t afford to build low-cost homes without tapping into our retirement savings?’ he asked The Malaysian Insider.
The EPF is providing the first tranche of RM300 million to a special purpose vehicle (SPV) undertaking the financing for those buying some 24,000 low-cost flats in the capital city.
Raja Nong Chik said on Thursday DBKL “did not ask [for] money from the government” as it wanted to “avoid politics” in the scheme described as a “liquidation exercise.”
The minister had told reporters that DBKL had decided against making direct loans to up to 35,000 city dwellers who are still renting and unable to borrow from banks as it needs funds for “future projects.”
Raja Nong Chik had earlier told Parliament that under the current rate of 6.5 per cent, a loan of RM36,100 over 25 years would incur a monthly repayment of RM243, or 50 per cent more than would be applicable with a 2.5 per cent interest rate.
“If we reduce it to 2.5 per cent, it will be RM161. It is only RM82 difference. This is just political posturing by the opposition,” the senator had said, and that the RM36,100 figure was for the newest and most expensive low-cost homes; the rest would be sold for less.
This did not sit well with PR MPs, who accused the Umno minister of being “insensitive” to rising costs of living among the poor in the city.
“RM82 is a large amount for the majority of the people, it is slightly more than 10 per cent of a standard household disposable income. This shows the minister does not understand the realities of urban living costs which are increasing due to government policies.
“There should not be any discrimination towards low-income earners seeing as independent power producers (IPPs) and the National Feedlot Corporation (NFCorp) received lower soft loan interest rates,” Nurul Izzah said.
She also demanded the minister clarify whether the 6.5 per cent interest rate included maintenance costs for the DBKL units which are going to be sold to buyers, and whether those who purchased the homes would be able to sell the units at market price.
“Raja Nong Chik is unfit to be the minister of urban well-being when he completely failed to understand and empathise with the poor man on the street.
“He has the cheek to dismiss a RM82 instalment difference as a ‘small amount’ when these low-cost housing dwellers earn less than RM1,000 per month,” DAP’s Pua said.
Raja Nong Chik triggered public outcry in January when he disclosed the proposed loan scheme will allow unqualified City Hall tenants to buy homes using up to RM1.5 billion from the EPF, which is tasked with safeguarding the retirement funds of over 5.7 million active contributors.
The Malaysian Insider reported last week that the plan to lend an initial RM300 million from the EPF to unqualified house buyers in the capital has hit a deadlock over security conditions demanded by the country’s largest retirement fund.
The EPF had said on February 8 that it is in talks with the federal government but a deal has not been inked for the initial sum of RM300 million to be lent to a special purpose vehicle linked to the Federal Territories Foundation (FTF).
The foundation is directly controlled by Raja Nong Chik.
The minister, however, said in Parliament yesterday that the EPF has already signed “a policy agreement to loan RM1.5 billion” for the housing scheme.
He previously said the loan would be secure as it is guaranteed by City Hall, a government agency, and that the EPF would get a 5.5 per cent return on investment annually from repayments by the new home owners.
The Umno senator also said he expects “not more than 10 per cent (of the borrowers) will default”.
He said that 24,000 renters have been given offers to buy their homes but only 12,000 have accepted, with 5,000 having found their own financing.