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Election Watch

No more than a subsidy, say economists

Source: Malay Mail
Date: 16 March 2012

KUALA LUMPUR: Economists lauded the Employees Provident Fund (EPF) housing loan scheme as a means to help the poor own homes, but were split over its efficacy.

Centre for Public Policy Studies chairman Tan Sri Ramon Ravaratnam said yesterday the scheme was nothing more than a "subsidy".

"It is a subsidy because they are already providing for the possibility of loss of funds," he said, referring to the condition set by EPF that 20 per cent of profits would be set aside for Kuala Lumpur City Hall (DBKL) to buy back homes in the event borrowers defaulted.

"The monthly instalments are not enough to cover the loan and interest," said the former Transport Ministry secretary-general.

"There are a lot of holes in the scheme. This is what happens when you give a subsidy indirectly rather than directly from the banking system."

He said the government was exposing the EPF to a lot of risks as borrowers might not be able to service the loans in the long run.

Commending the government's move, Rating Agency Malaysia Berhad's (RAM) group chief economist Dr Yeah Kim Leng said it was akin to corporate social responsibility.

"The homes are owned by City Hall and they are just converting them from rental based to home ownership," he said.

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