reporter2
15-07-13, 16:06
http://www.businesstimes.com.sg/premium/top-stories/no-bank-developer-tie-ups-20130715
Published July 15, 2013
No to bank-developer tie-ups
New MAS rule prohibits preferential rates for property loans to clients buying designated properties
By Felda Chay
[SINGAPORE] The government is clamping down on a common practice where property developers and agents tie up with banks to sell property: it has introduced a wide-ranging rule that will, among several things, stop banks from offering preferential interest rates for loans to clients who buy designated properties.
BT understands that the Monetary Authority of Singapore (MAS) informed financial institutions (FIs) of this new rule in a letter sent out on the same day the new property loan rules were announced in late June. All forms of tie-ups with property developers and agents are not allowed under this new rule, which took effect from June 29.
Asked about the regulation, an MAS spokesman told BT: "MAS is of the view that, except for the granting of property loans, FIs should not be offering any property-related services to customers in general. FIs should therefore not engage in property advertisements or tie-ups with property developers/agents.
"This is regardless of the location of the property (in Singapore or overseas) or the type of the property (residential, commercial or industrial). MAS will take into account an FI's compliance on this issue, in its supervisory assessment of the FI."
Examples of what is prohibited include FIs working with developers and agents to offer customers preferential interest rates for loans to buy designated properties, or inviting banking customers to property launches, MAS stated.
Also disallowed is the organising of special previews for banking customers, and advertising and sending letters, email or phone messages on launches or properties for sale.
Property consultants BT spoke to say these are all common marketing strategies that property developers and agents engage in with banks.
Developers and agents often choose to work with banks because almost every individual has a bank account, which means that FIs have a large database of clients that can be tapped. And because banks group customers in categories according to criteria such as a client's balances in deposits and investments, agents and developers typically would know whether the group of individuals they are reaching out to have the financial power to make a property purchase.
Said one property consultant, who declined to be named: "You do see it, where they do some joint marketing or they draw on each other's database. You see many examples where a bank's customers get flyers or invites from the bank to a special property preview, and then they are offered a special loan package."
Therefore, one aim of the rule is likely to ensure that the evaluation process for loans stays objective, the consultant added.
Ong Choon Fah, chief operating officer at DTZ, said: "Now that FIs cannot offer customers special interest rates for loans, all customers will be evaluated based on factors like the value of the property and the creditworthiness of the borrower, and not because of a tie-up with that particular development. So I think the evaluation process may be seen as more arm's length.
"If they have a tie-up with the development, it means that, in a way, they may be perceived as less objective. So maybe part of the intent is that banks should be impartial and evaluate all loans equally and objectively."
This view is shared by Chia Siew Chuin, director of research and advisory at Colliers International.
Ms Chia said the rule prohibiting banks from advertising developments and working with property developers and agents will therefore ensure that the lending industry functions independently and separately from any possible influences.
"Besides the prevention of any possible conflicts of interest, this also allows for greater transparency and equity in both the financial and real estate industry and for borrowers," she added.
Another consultant who declined to be named noted that the MAS rule is so general that it could mean banks cannot provide any form of incentives to entice potential buyers to make a purchase.
"It likely means that banks also cannot offer things like 'free gifts' and vouchers, on top of special interest rate loan packages," he said.
It may also mean banks cannot invite clients to any showflats, "since the act of inviting their clients is seen as a form of endorsement of the real estate product", he said.
And the rule, if interpreted to the extreme, could even mean that bankers can no longer enter showflats to provide advice and loan application forms because that could also be seen as a tie-up, the consultant added.
If it does extend to bankers entering showflats, the aim of the rule could also be to have people deliberate over a potential purchase and buy less on impulse, noted Ms Chia.
This is because bankers often have on hand loan application forms at showflats, and provide advice on loan packages and interest rates there and then. Homebuyers can then fill up loan application forms on the spot, though approvals are not granted at showflats.
BT understands that bankers were present at some property launches over the weekend.
Overall, one consultant believes that "the intention of the rule is to reduce the promotional activities of property sales, especially where it could be banks enticing clients to buy the properties", which could fuel an upward spiral in asset values.
He explained: "Suppose bank ABC supported a developer by lending for its purchase of a piece of land, and the land price that is bidded is a new record high, and sets a new land value benchmark. The developer gets approvals and then launches the strata titled units (apartments, industrial, commercial, retail)."
The same bank ABC, wishing to see the development sell out fast, will work jointly with the developer as the preferred mortgage provider and invite its own clients to the launch, dangling special loan packages and other incentives to woo customers.
"When the development sells well, the developer can repay the land loan comfortably, and bank ABC is happy. The bank has also benefited from having secured, say, 50-70 per cent of all the loans for the strata units purchased by the consumers, adding to its profit margins.
"And the new price levels set by investors buying the strata units will give further leeway for banks to support developers to bid at even higher prices for land," said the consultant.
http://www.businesstimes.com.sg/premium/top-stories/new-rule-20130715
Published July 15, 2013
The new rule
By Felda Chay
FINANCIAL institutions (FIs) should not offer any property-related services to customers except for the granting of property loans. They should therefore not send property advertisements to their customers or enter into tie-ups with property developers/agents.
This is regardless of the location of the property (in Singapore or overseas) or of its type (residential, commercial or industrial).
MAS expects FIs' full compliance on this issue, which will be taken into account as part of its supervision of FIs.
Examples of property advertisements and tie-ups include but are not limited to:
Advertisement of property launches or properties for sale or purchase on the websites, mobile applications and premises of FIs;
Sending notifications (eg via mail, email or phone text) to customers on property launches or properties for sale or purchase;
Inviting customers to property launches;
Organising special previews of property launches for customers; and
Arranging with property developers/agents to offer customers preferential interest rates for loans to buy designated properties.
Published July 15, 2013
No to bank-developer tie-ups
New MAS rule prohibits preferential rates for property loans to clients buying designated properties
By Felda Chay
[SINGAPORE] The government is clamping down on a common practice where property developers and agents tie up with banks to sell property: it has introduced a wide-ranging rule that will, among several things, stop banks from offering preferential interest rates for loans to clients who buy designated properties.
BT understands that the Monetary Authority of Singapore (MAS) informed financial institutions (FIs) of this new rule in a letter sent out on the same day the new property loan rules were announced in late June. All forms of tie-ups with property developers and agents are not allowed under this new rule, which took effect from June 29.
Asked about the regulation, an MAS spokesman told BT: "MAS is of the view that, except for the granting of property loans, FIs should not be offering any property-related services to customers in general. FIs should therefore not engage in property advertisements or tie-ups with property developers/agents.
"This is regardless of the location of the property (in Singapore or overseas) or the type of the property (residential, commercial or industrial). MAS will take into account an FI's compliance on this issue, in its supervisory assessment of the FI."
Examples of what is prohibited include FIs working with developers and agents to offer customers preferential interest rates for loans to buy designated properties, or inviting banking customers to property launches, MAS stated.
Also disallowed is the organising of special previews for banking customers, and advertising and sending letters, email or phone messages on launches or properties for sale.
Property consultants BT spoke to say these are all common marketing strategies that property developers and agents engage in with banks.
Developers and agents often choose to work with banks because almost every individual has a bank account, which means that FIs have a large database of clients that can be tapped. And because banks group customers in categories according to criteria such as a client's balances in deposits and investments, agents and developers typically would know whether the group of individuals they are reaching out to have the financial power to make a property purchase.
Said one property consultant, who declined to be named: "You do see it, where they do some joint marketing or they draw on each other's database. You see many examples where a bank's customers get flyers or invites from the bank to a special property preview, and then they are offered a special loan package."
Therefore, one aim of the rule is likely to ensure that the evaluation process for loans stays objective, the consultant added.
Ong Choon Fah, chief operating officer at DTZ, said: "Now that FIs cannot offer customers special interest rates for loans, all customers will be evaluated based on factors like the value of the property and the creditworthiness of the borrower, and not because of a tie-up with that particular development. So I think the evaluation process may be seen as more arm's length.
"If they have a tie-up with the development, it means that, in a way, they may be perceived as less objective. So maybe part of the intent is that banks should be impartial and evaluate all loans equally and objectively."
This view is shared by Chia Siew Chuin, director of research and advisory at Colliers International.
Ms Chia said the rule prohibiting banks from advertising developments and working with property developers and agents will therefore ensure that the lending industry functions independently and separately from any possible influences.
"Besides the prevention of any possible conflicts of interest, this also allows for greater transparency and equity in both the financial and real estate industry and for borrowers," she added.
Another consultant who declined to be named noted that the MAS rule is so general that it could mean banks cannot provide any form of incentives to entice potential buyers to make a purchase.
"It likely means that banks also cannot offer things like 'free gifts' and vouchers, on top of special interest rate loan packages," he said.
It may also mean banks cannot invite clients to any showflats, "since the act of inviting their clients is seen as a form of endorsement of the real estate product", he said.
And the rule, if interpreted to the extreme, could even mean that bankers can no longer enter showflats to provide advice and loan application forms because that could also be seen as a tie-up, the consultant added.
If it does extend to bankers entering showflats, the aim of the rule could also be to have people deliberate over a potential purchase and buy less on impulse, noted Ms Chia.
This is because bankers often have on hand loan application forms at showflats, and provide advice on loan packages and interest rates there and then. Homebuyers can then fill up loan application forms on the spot, though approvals are not granted at showflats.
BT understands that bankers were present at some property launches over the weekend.
Overall, one consultant believes that "the intention of the rule is to reduce the promotional activities of property sales, especially where it could be banks enticing clients to buy the properties", which could fuel an upward spiral in asset values.
He explained: "Suppose bank ABC supported a developer by lending for its purchase of a piece of land, and the land price that is bidded is a new record high, and sets a new land value benchmark. The developer gets approvals and then launches the strata titled units (apartments, industrial, commercial, retail)."
The same bank ABC, wishing to see the development sell out fast, will work jointly with the developer as the preferred mortgage provider and invite its own clients to the launch, dangling special loan packages and other incentives to woo customers.
"When the development sells well, the developer can repay the land loan comfortably, and bank ABC is happy. The bank has also benefited from having secured, say, 50-70 per cent of all the loans for the strata units purchased by the consumers, adding to its profit margins.
"And the new price levels set by investors buying the strata units will give further leeway for banks to support developers to bid at even higher prices for land," said the consultant.
http://www.businesstimes.com.sg/premium/top-stories/new-rule-20130715
Published July 15, 2013
The new rule
By Felda Chay
FINANCIAL institutions (FIs) should not offer any property-related services to customers except for the granting of property loans. They should therefore not send property advertisements to their customers or enter into tie-ups with property developers/agents.
This is regardless of the location of the property (in Singapore or overseas) or of its type (residential, commercial or industrial).
MAS expects FIs' full compliance on this issue, which will be taken into account as part of its supervision of FIs.
Examples of property advertisements and tie-ups include but are not limited to:
Advertisement of property launches or properties for sale or purchase on the websites, mobile applications and premises of FIs;
Sending notifications (eg via mail, email or phone text) to customers on property launches or properties for sale or purchase;
Inviting customers to property launches;
Organising special previews of property launches for customers; and
Arranging with property developers/agents to offer customers preferential interest rates for loans to buy designated properties.