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Cagamas SRP Launches Digital Home Financing Service Aimed at Young First Time Home Buyers

Another sign of Malaysia’s prominent position in digitisation in financial services products is the launch on 10 September 2020 of the Digital Skim Rumah Pertamaku (Digital SRP), the country’s first online home financing service aimed primarily at first time home buyers.

Digital SRP is a collaborative online service for prospective eligible Malaysian home buyers launched by Cagamas SRP Berhad, a subsidiary of Cagamas Berhad, the National Mortgage Corporation of Malaysia, one of the most prolific issuers of Sukuk and conventional mortgage securitization market in Malaysia. The launch was officiated by Zuraida Kamaruddin, Malaysian Housing and Local Government Minister, in the presence of Datuk Chung Chee Leong, President/ Chief Executive Officer (CEO) of Cagamas Berhad.

The service was launched in collaboration with Didian, a B2B property marketplace that connects property agencies with new launch properties from Malaysia’s top developers, and TRB Ventures Sdn Bhd (MHub), a proptech ecosystem focusing on solutions to speed up, simplify and save cost in property transactions. To date, MHub, for instance, has captured more than 17,000 bookings with a total of 470 projects worth RM 73 billion from 70 developers.

Cagamas SRP Berhad was incorporated in January 2011 to undertake the guarantee of residential mortgages under the Skim Rumah Pertamaku (SRP) (My First Home Scheme) announced by the Government in the 2011 Malaysia Budget and the Skim Perumahan Belia (Youth Housing Scheme) announced by the Government in October 2015. The provision of guarantee under both schemes is based on the mortgage guarantee programme offered to financial institutions.

As of June 2020, SRP has benefitted close to 33,000 first time house buyers, of which 90% are from the B40 low-income group, which according to the Department of Statistics Malaysia (DOSM) are those with a household income of less than RM4,850 per annum. Since its launch Cagamas SRP has disbursed RM6.8 billion of home financing to eligible applicants, of which 84% is based on Islamic mortgage finance contracts, mainly Murabaha Diminishing Muharaka financing.

SRP is a government initiative to assist eligible first-time home buyers to obtain up to 110% financing from participating banks, enabling them to own a home without making a down payment. According to Cagamas SRP, about 71% of the approved applications were from Selangor, Johor, Kuala Lumpur, Perak and Melaka. The average loan size was RM206,450 with 86% of the approved applicants being 25 to 40 years of age. Out of this, 27,600 or 84% of the applications were Islamic financings while the balance of 5,400 or 16% were conventional mortgage loans.

Cagamas SRP Chairman, Dato’ Bakarudin Ishak, formerly Head of the Islamic Banking and Takaful Department at Bank Negara Malaysia and an Assistant Governor, was delighted with the collaboration with Didian and MHub “to offer an integrated platform which connects home buyers, bankers, developers, and real estate agents.”

According to Dato’ Bakarudin the new online service facilitates three things:

i) “Digital SRP provides new access for prospective first-time house buyers to a wider selection of more than 130,000 properties of which, more than 50% are eligible under SRP, and assistance from close to 2,000 real estate agents across more than 300 agencies nationwide.”

ii) “Digital SRP is convenient, time efficient and value enhancing. Prospective buyers can now identify properties eligible under SRP online, check their financing eligibility and apply for loans without having to ‘walk-in’ to the bank. Online loan applicants will be contacted by the participating banks for further processing of their application,” and

iii) “Most importantly, Cagamas SRP is helping more Malaysians own their first home with this digital initiative. We hope Digital SRP will stimulate more than a 50% increase in cumulative SRP loans to RM12.6 billion by 2021.”

Not surprisingly, with these partnerships, Cagamas SRP expects a cumulative increase of SRP loans approved by 14,400 in 2020 from a cumulative base of 26,213 in 2019 with a total financing of RM9 billion.

Malaysia’s financial digitisation drive is facilitated by a combination of requisite enabling legislation, proactive regulatory framework and guidelines, a clear digitisation policy and strategy at the government and regulators’ level, a suite of products which include facilitation of financial and social inclusion, landmark Sharia’a rulings approving digital services and products including e-money, digital assets and exchanges, a surfeit of online products and their underlying Sharia’a contract structures, and a high incidence of internet access.

As of January 2020, Malaysia, according to Cagamas SRP, had close to 26.7 million internet users with a median age of 30.3. This median age closely corresponds with SRP’s customers who are between 25 and 40 years of age. Digital SRP is, therefore, expected to enable and facilitate more enquiries and home purchases for internet savvy buyers within this segment.

Didian Director, Chow Nam Kit, maintained that its “collaboration with Cagamas to launch the Digital SRP will make good on our commitment to our agents and agencies to bring them better opportunities. With Digital SRP, our agents will be able to seamlessly apply for SRP on behalf of their customers in just a few clicks. With our exciting upcoming pipeline of projects and more liquidity for buyers through SRP, we are optimistic our agents will have the right tools to help their clients find, purchase, and own their ideal first homes.”

Similarly, MHub’s CEO, Quek Wee Siong is confident that through this collaboration, the company will “help first time home buyers get educated and gain access to the SRP loan scheme by using its intelligent matching platform to pre-qualify these buyers and by channelling their applications to the various banks that offer SRP loans. Currently MHub has close to 90,000 homes for sale in this product category with a combined Sales Purchase Agreement (SPA) value of RM27 billion.”

Digital SRP users can also apply for financing by visiting the nearest branch of the participating banks. Currently, there are 25 participating banks nationwide.

SRP is open to first-time house buyers earning RM5,000 and below for single applicants, or RM10,000 and below for joint applicants. They are eligible to purchase a property in either the primary or secondary market with a maximum value of RM500,000.

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