KUALA LUMPUR -- The special scheme for the purchase of People's Housing Programme-National Economic Action Council (PPR-MTEN) and Kuala Lumpur City Hall (DBKL) public housing does not involve the Employees' Provident Fund (EPF) providing loans to individuals, the EPF said.
EPF deputy chief executive officer and investment chief Shahril Ridza Ridzuan said as such interested participants should apply directly to the Federal Territories and Urban Well-being Ministry and not to the EPF.
He added that the EPF is in discussion with a special purpose vehicle of the Federal Territories Foundation (SPV FT Foundation) to provide a loan of which terms are being finalised.
"Essentially the terms entail an initial facility of RM300 million with any further loans to be granted at the discretion of the EPF investment panel subject to the satisfactory performance of the conduct of the account by the SPV FT Foundation," he said.
This would be reviewed 12 months from the date of the last drawdown of the RM300 million, he added.
"The EPF would like to ensure its members that all loans provided by the EPF to the government of Malaysia or its agencies are made on commercial terms and with appropriate security to protect the interest of our members," he said in a statement.
The statement came following numerous concerns raised by the public over the loan scheme, which as announced by Federal Territories and Urban Well-being Minister Raja Nong Chik Raja Zainal Abidin.
Raja Nong Chik said during a briefing on Friday that the EPF would gain a 5.5 per cent profit from its RM1.5 billion funding of the scheme, announced by Prime Minister Najib Tun Razak last month.
The scheme is expected to commence next month with hire purchase agreements expected to be signed in May.
Shahril Ridza said the SPV FT Foundation would enter into an Ijarah scheme lease agreement with the individual participants.
"The ownership of the house shall remain with the SPV FT Foundation until the lease agreement has been fully settled by the individual participants.
"The loan would be well secured as all housing units will be charged or assigned by the SPV FT Foundation to the EPF, with security cover of at least twice the loan amount," he said.
In addition, there will be cash retention of 25 per cent of the disbursement of the EPF loan to the SPV FT Foundation to be set aside in a liquidity reserve account assigned to the EPF, together with the assignment of all cash flows.
"The terms of the loan agreement are within the risk appetite of the EPF as it is secured against assets and cash flow with a suitable guarantee on repayment of the loan made. We understand that the SPV FT Foundation will only select participants with good track records," he added.
He said that to ensure good conduct of the individual accounts, the EPF has requested the SPV FT Foundation to engage a suitable financial institution to manage the credit administration of the scheme.
Under the proposed terms, DBKL will buy back the houses to secure the cash flow required for the repayment of the loan in the event of non-payment.
"Based on the terms and the security arrangements that we have put forth, the EPF is well protected and the annual 5.5 per cent profit rate imposed on the loan is fair.
"The EPF is always mindful of members' concerns and would like to reiterate that their retirement savings are invested prudently within a framework of good governance and adopting a conservative risk-return profile," he said.
