Companies can now issue bonds to raise funds to build houses and shops priced above RM250,000 in line with the recent easing of lending restrictions by Bank Negara.

The SC said, on behalf of the National Bond Market Committee (NBMC), that proceeds from private debt securities (PDS) issues could now be used to finance the development of residential properties priced above RM250,000 per unit, on condition that proceeds from the bond issues be drawn down only upon the developers achieving break-even sales in value terms.

For the development of shophouses above RM250,000 per unit, PDS proceeds may be used to finance their development on condition that such developments are located within residential areas and the proceeds are drawn down upon achieving break-even sales.

In a statement yesterday, the SC said financing for the development of the following was also allowed now:

l Residential properties, shophouses and office buildings in Putrajaya and Cyberjaya;

l Development of residential properties, shophouses, commercial buildings, shopping complexes and hotels in Kulim Technology Park;

l Houses, shops, hotels, resorts, offices, golf courses, clubs and shopping complexes, where construction has commenced and the project is owned by Malaysian-controlled companies only; and

l Refinancing of properties where approval for the loan has been granted.

For non-resident controlled companies, additional restrictions may be imposed as stated in the Controller of Foreign Exchange's Guidelines on Private Debt Securities.

The restrictions on the utilisation of proceeds from issuance of PDS have been compiled into what is commonly known as the “NBMC Negative List”, first issued on June 30. The updated list is available at the SC website (www.sc.com.my).

Property analysts generally viewed the relaxation as helpful for the development of large long-term projects but it was unlikely to make any immediate difference on the property market, which was currently still soft and in oversupply.

“There is still supply and demand to be considered. Developers, especially smaller ones or new comers, will not just jump in just because they can raise funds through PDS. However, it does give established developers more flexibility and avenues to raise funds, especially for developing high-end properties in niche locations,” one analyst said.

Another analyst saw no reason for developers to use proceeds from PDS, unless they were large firms developing long-term projects such as new townships, including Cyberjaya and Putrajaya, where investments in infrastructure would be recovered only in a few years.

“The developer would want to issue a PDS to lock in a low interest rate for the next five to 15 years,” he said.

However, a normal development project would not really require the proceeds from PDS if it were viable, as there were bank loans and soft financing from the sale of units. If it were not viable, using the proceeds from PDS would only make the situation worse, he pointed out.

Last week, Bank Negara lifted the restriction on bridging finance for development of residential properties and selected shophouses costing above RM250,000. The move was seen by analysts as benefiting high-end properties, and one that might help accelerate loans growth in the banking sector.

Bridging financing for the development of houses and shops costing above RM250,000 was frozen in January 1999 as part of measures to reduce excess supply in the property market.