Here, we’ll explain it all with a handy step-by-step process, so you can get a better idea:
Let’s take a look at the issues (highlighted in red) that make this process so inefficient.
Problem 1: A flawed balloting process
The problem begins early on in the process with the random balloting that takes place.
Before that, let’s go through what the current sales and balloting process looks like. After a potential homebuyer has registered his/her interest for an affordable housing programme with the government agency, the next step is to have socioeconomic verification. This means that the individual’s income status needs to be verified to see if he/she meets the criteria to be considered for the programme.
Once that is done, the random balloting process begins. Right here is where it gets sketchy: the projects can be oversubscribed by as much as 50:1, which is already a clear indication that there are way too many people who seem to be ‘qualified’ for purchasing a unit!
Problem 2: Eligible balloters are suddenly ineligible
The list of successful balloters would be given to the respective property developers for them to carry out the next step: notifying applicants so that they can proceed with a purchase. This should be good news right? The balloters will now be happily applying for home loans from various commercial banks, thus bringing them one step closer to their new home.
But wait! This isn’t always the case because it’s at this point in time that many of the hopefuls will be receiving notifications from their banks. Turns out they aren’t eligible after all, because of three main reasons:
- Incomplete documentation, due to the often confusing number of paperwork required by the respective banks.
- Bad credit history according to both the CCRIS (defaulted on loans, or some who not aware that their PTPTN loan carries weight) and CTOS (an individual’s market reputation) reports.
- The eligibility based on the Debt Service Ratio (DSR), a figure that indicates whether an individual has too much commitments on hand and not enough salary to cover.
Here’s where most people will start to cancel or drop out from the list because of that. This leads to an undesirable situation where there is a less than 10% conversion rate per round.
Problem 3: Repetitive measures
All of this would paint a very unhappy picture for property developers of these affordable housing projects. They’d have to repeat the balloting process until all of the units are successfully sold off, which would usually take more than a year to do so.
Property developers are also the ones who would be on the biggest losing end, considering the costs they’ve pumped in for construction and advertising purposes, among others. There’s also the lower profit margin gained from selling these type of projects, compared to the conventional money-generating projects that they are used to.
How can this be rectified?
Just one step is needed to correct the entire sales and balloting process. The recent introduction of Loanplus and its innovative Loan Scoring technology to the market has helped purchasers to know their borrowing power across 15 banks upfront with minimal hassle, including:
- Banks from which they are eligible for a mortgage.
- The maximum amount allowable according to each bank.
- The probability of a successful loan completion.
There’s no longer a need to approach banks or to for wait days for results!
People are now segmented according to their loan eligibility, providing them with fast and accurate results. It allows for successful balloters to be able to know firsthand whether they are eligible for a loan before they actually get to the application process for available projects. This system can also be provided in bulk form, which suits cases where property developers have a large database of pre-registered customers.
The next step would now be the balloting itself. The list generated by Loanplus will allow the right inventory to be matched to the right segment of potential homebuyers. The successful balloters list will be notified by the respective property developers, in order for them to proceed with their purchase.
Loan applications made with commercial banks will now have a higher chance of approval, after which is the signing of the Sales and Purchase Agreement. See how smooth the entire process was? Not only will there be minimal repeat balloting, the conversion rate will now be as high as 90%!
Buying a home shouldn’t be so difficult
It should be a win-win situation for all parties involved. Loan Scoring reports have been designed specifically with one purpose in mind: to make hard-to-get information about loan eligibility available at the point-of-sale.
Based on this, the customer can, in good confidence, know exactly how much of a loan they are able to get before committing to a purchase, or backing down. On the other hand, property developers can use the information to decide if the potential customer is worth the wait, which helps reduce incidences of botched sales drastically.