BY Chris Prasad
The property market has taken an incredible beating in the current harsh climate, as a sustained poor economy has resulted in a palpable loss of consumer appetite.
However, even in the face of downward spiralling numbers, some of the country’s leading property developers are rallying to fight the ensuing lull with aggressive and creative marketing campaigns that address the key concern of buyers – financing.
Showing exactly why they are at the top of the pyramid, top developers are clearly not content to sit idly as the storm passes by. Instead, they are taking a proactive stance to resuscitate buyer interest via innovative packages that mostly target buyers who have been excluded, either fully or partially, from home buying by financial institutions.
Remarkably, their efforts seem to be working, and market stakeholders now hope that other players will emulate the success of these campaigns to give the industry a much-needed boost.
For example, Sunway Bhd has seen interest in its properties pick up considerably since it unveiled its Sunway Property Certainty Campaign, with recent projects such as Sunway Mont Residences achieving 80 per cent take-up soon after the launch date.
According to the group’s property division, Sunway Property, the campaign is designed to offer alternative financial aid to would-be buyers by circumnavigating the stringent home loan climate created by banks.
The campaign offers three packages which comprise a guaranteed loan (offered by Sunway itself), deferred payment scheme and voluntary exit plan.
At the launch of the campaign, Sunway Property managing director Sarena Cheah said there is still strong demand for quality properties in good locations and that people are still looking to upgrade, invest and own a home in well-planned environment sequipped with comprehensive amenities.
“For home buyers who meet the basic criteria, we are happy to assist them by providing the guaranteed loan, thereby giving them a greater sense of security,” Cheah said.
“Home buyers can also opt for the deferred payment option with an initial down payment as low as 3 per cent. We have also put in place the option for purchasers to terminate their sale and purchase agreement (SPA) if they lose their employment,” she added.
Cheah told Property360 that the guaranteed loan, which is given to those who are unable to obtain a bank loan, will not be of any trouble to the company as the company will get back the units if buyers cannot service the loan.
“We are not taking over the job of banks, we are only addressing the ‘what if’ situation, hence the voluntary exit plan, where buyers can terminate their SPA in case they can’t continue with the loan,” she said.
Similarly, property big-gun SP Setia Bhd has deployed its “Setia 10:90” package with visible success, garnering rapid take-up at freshly-minted projects such as Setia Eco Templer and generating huge interest for upcoming projects such as Setia EcoHill2.
Group executive vice president Tan Hon Lim explained that the “Setia 10:90” package is actually a build-then-sell package, where apart from the first 10 per cent being billed at the point of signing the SPA, there is no other progressive billings until the completion of property.
“The remaining 90 per cent of purchase price is invoiced upon delivery of vacant possession supported by the certificate of completion and compliance,” he said.
On who is eligible to participate, Tan said that there are no special requirements or qualification to be entitled to this package other than the ability to put up the 10 per cent downpayment.
Tan said in this soft market, where bank loan applications are more stringent, the package is an attractive solution that reduces the financial burden of buyers.
SP Setia has made the scheme a major part of its sales initiative in 2016 and approximately 13 phases from various projects (with a combined GDV of RM3 billion) will be rolled out under the Setia 10:90 banner.
Another key player employing innovative solutions is IOI Properties Group Bhd, which is offering a payment deferment scheme for those who cannot make a lump sum down payment at the initial stage of the purchase. Typically downpayments amount to 10 per cent of the property price, but under this scheme, buyers can pay this differential sum in instalments over 18 to 24 months upon signing the SPA.
According to IOI Properties, buyers must issue post-dated cheques which are deposited every three months once they successfully obtain up to 90 per cent inancing from banks. The deferred payment scheme comes in addition to heavy discounts and price rebates already applied to the price of the property.
Others throwing their creative thinking into the mix include SDB Properties Sdn Bhd, which is offering a rent-to-buy scheme for selected completed condominiums in Cheras and landed homes in Puchong.
Under this arrangement, the price to be paid by the buyer is divided into two portions of 30 per cent and 70 per cent. Five per cent needs to be paid upfront and 8 per cent must be paid over the next three years, but the additional 17 per cent is free.
After the three-year period, the remaining 70 per cent portion must be paid or the amount already paid up during this period will be forfeited by the developer. The buyer does, however, have the option to sell the unit after this period to address any potential losses.
Overall, the need to “get creative” in the market is becoming more and more urgent as the latest numbers from Bank Negara Malaysia show that earnings growth contracted by as much as 21 per cent in the final quarter of 2015.
For many, this figure is alarming given that developers are working through millions of ringgit worth of unbilled sales. Insider sources reveal that some developers have even revalued properties to prop up their balance sheet.
In such a climate, the introduction of innovative financing schemes to boost sales can be seen as an important step to mitigate the impact of the current downturn. In a country like Malaysia, where home ownership is still rated a high priority among average citizens, many will be keen to capitalise on any advantage offered.