90% of Affordable Home Loans Are Rejected, So Here’s How Loanplus Aims to Help

90% of Affordable Home Loans Are Rejected, So Here’s How Loanplus Aims to Help

by September 4, 2018

There’s a housing crisis in Malaysia, and as of recent years has only grown worse. A contentious study released by Bank Negara Malaysia revealed that from 2016 to early 2017, only 24% of new property launches were in the range of approximately RM250k, which indicates an undersupply of affordable homes.

Yet, there are still too many affordable homes that remain empty despite the high demand. Malaysia had plans to help fix the issue by selling 606,000 affordable homes by 2020, but it’s been three years into the project, and only 33% of the intended number of homes were sold.

Existing red tape and bureaucratic backlogs have further diminished what is already a limited number of affordable homes available to Malaysians, and this is partly due to the balloting process, which randomly selects an applicant who is given the opportunity to buy a house.

To keep affordable homes affordable, balloting is a necessary evil that prevents a property’s price from hiking up due to bidding wars.

So this fintech company hopes that its data processing abilities can help streamline this process.

Loanplus’ Solution is Infiltrating the Current Balloting Process

loanplus affordable home balloting infograph

Image Credit: Loanplus

Currently, Loanplus is holding discussions with key players in the Government Affordable Housing, and may lead to their services to be incorported by affordable home providers such as Pr1ma and SPNB.

According to Loanplus, the inefficiencies of government-sanctioned affordable home programmes lies in their balloting process, which they described as “done randomly without any pre-qualification of buyers”.

The random process leads to a 90% affordable home loan rejection rate from the banks.

Loanplus’ solution is to pre-qualify applicants, and provide government agencies with streamlined data, along with recommendations of groups that have the best chance of getting loan approvals. It is these groups who are added into the ballot pool.

Applicants who are selected from the random balloting process are then given a list of loans from 15 Malaysian banks that best match their earning capabilities, and in fact Loanplus claims that going through their process will quicken the approval process.

Those rejected will also be given suggestions on how to improve their loan scores for future applications.

The move into public sector marks an expansion of Loanplus’ existing offerings, which offers loan checking and screening solutions for property developers and vehicle sellers, as well as end-to-end loan application services. Some of its existing clients include private property developers like Paramount, IJM Land, Huayang, Leadmont and Mitraland.

Fintech and Housing

The potential fintech has to improve the housing industry is not a new topic of discussion. The current inefficient and cumbersome process of home buying and selling is rife for disruption. For example, some parties have suggested the incorporation of blockchain technology into a buyer’s permanent record, which removes the need for audits or approvals.

More to the point though, there have been calls to increase transparency in the housing sector, specifically for the public to be able to access crucial information like how interest rates are calculated, black marks in one’s financial track record that leads to loan rejections, and even bidding wars on homes.

A more transparent bidding process where everyone is able to view the current prices offered could help reduce the overall price of property by removing much of the guesswork out of bidding, and could lead to a reduced reliance on affordable property in the long-term.

It seems like Loanplus has stepped into some fertile ground for fintech, but it will remain to be seen if the company is able to capitalise on the opportunities laid out before them.

Featured Image Credit: Loanplus