Satisfaction of the Sub-Sale House Purchasing: Are the Islamic Banks Different?

Transcription

1. Empirical Economics Letters , 20 (Special Issue 2) (May 2021) ISSN 1681 8997 Satisfaction of the Sub-Sale House Purchasing: Are the Islamic Banks Different? Amirul Afif Muhamat Faculty of Business and Management Universiti Teknologi MARA, Selangor, Malaysia Mohamad Nizam Jaafar* Arshad Ayub Graduate Business School Universiti Teknologi MARA, Malaysia Dayang Hazenah Awang Abdul Hamid Malaysian Armed Forces, Ministry of Defence Jalan Padang Tembak, 50634 Kuala Lumpur, Malaysia Nur Hidayah Jusoh Affin Bank Berhad, Consumer Operations Department No.80, Jalan Raja Chulan, 50200 Kuala Lumpur, Malaysia Norzitah Abdul Karim Faculty of Business and Management Universiti Teknologi MARA, Selangor, Malaysia Abstract: Islamic banks are expected to be profitable and socially responsible. The Islamic home financing is the biggest contributor for Islamic commercial banks’ earnings. Likewise, the home financing clients are either buyers of newly constructed houses or sub-sale houses and each one of them has a different experience. Nevertheless, the sub-sale house buyers are perceived to have torrid time during the transaction because the sub-sale house does not govern directly under the Housing and Development Act 1966. In the context of Islamic banks, while they have been earning lucratively from this business segment, do they extend assistance to the sub-sale house buyers or they are no different than the conventional banks? The sub-sale house buyers have entered into the Sale and Purchase Agreement (SPA) in good faith by paying deposit to the house owner through lawyer, hire the SPA lawyer, engage with Islamic banks and even pay for the Islamic banks’ lawyers who had been appointed to manage the case. This article conceptually discusses this critical issue yet lack of attention from the stakeholders. Keywords: Sub-Sale, Islamic Financing, Housing, Owner, House Buyer, Sale and Purchase Agreement * Corresponding author. Email: mnizam7520@uitm.edu.my
2. Empirical Economics Letters , 20 (Special Issue 2) (May 2021) 186 1. Introduction House financing is a lucrative business for the banks regardless of types of the banks, either conventional or Islamic banks. The Islamic banking sector is expected to expand despite turbulence times of coronavirus pandemic, driven by the household financing (Tjitra, 2021). Haron and Shanmugam (2001) inform that Islamic home financing is the major product for Islamic banks, Zabri and Mohammed (2018) describe the growth as gradual increment from RM14.97 billion in June 2008, the Islamic home financing products managed to reach RM137.67 billion in June 2018, a 27.24 per cent share of total home financing in Malaysia. The growth of Islamic banks particularly for the home financing segment is supported by the home buyers who are the banks faithful clients who keep on patronizing the banks and servicing their loans. It must be emphasised here that the home buyers are either purchased newly constructed houses or sub-sale houses and the experience of them during the purchasing period is different. This study presents conceptual discussion on this important yet forgotten issue by many, either in the literature as well as in the real world. 2. Issue The process to purchase a sub-sale house is not as smooth as the newly constructed house by the housing developer due to the various requirements such from the Inland Revenue Board (IRB), district office, lawyer, bank and valuation office. There are various parties involved with the sub-sale house purchase. The district office will require time to check the status of the house and other charges that are related such as quit rent and other arrears. The information is the relayed back to the lawyer and then to the bank. If there is a missing document, then the process starts again which is very time consuming. SPA lawyer then will need to liaise with the bank’s lawyer and the “funny part” is that the bank’s lawyer is being paid by the sub-sale house buyer and can only be selected from the panel of lawyers that banks have chosen. If a sub-sale buyer needs to pay for the service, then the sub-sale buyer should be given the option to choose whomever to represent the sub-sale house buyer. The IRB involves a stamp duty process while valuer is needed to inspect and determine the value of the house. Despite the tedious process, Saleh et al. (2017) suggest that the attraction towards the purchase of a sub-sale house due to the price that can be negotiated and features that meet the buyer’s preference such as location, additional fixtures and fittings that have been installed by the previous owner to the house such as kitchen cabinet, wallpaper and others. Above all, the mismatch between the price of a newly built house and affordability of the potential buyers is the utmost reason.
3. Empirical Economics Letters , 20 (Special Issue 2) (May 2021) 187 Nevertheless, Sim (2012) cautions that a buyer who plans to purchase a sub-sale house must take into consideration several matters before signing the sale and purchase agreement (SPA) particularly on the condition of the house. This is pertinent, for instance, the hidden and remotely access part of the house which are difficult to be examined like the water tank, drainage system and roof conditions. In the context of Malaysia, the house-in-constructions is bound under the Housing and Development Act (HAD) 1966 but not for the sub-sale house. The HAD 1966 covers almost the necessary features of transactions and conditions that are related to house purchases, however, since the sub-sale purchase of house does not fall under the HAD 1966, so only the ordinary law of contract that can be used, which to some extent, in comparison to HAD 1966 – more generic (Abdullah, Ramly and Ikhsan, 2018), Therefore, without the HAD 1966, the sub-sale house buyers cannot bring any dispute to the Tribunal for Consumer Claims (Sufian and Rahman, 2008). Amstrong and Block (2007) stress on the caveat emptor that places burden to ensure the house is in good condition on the buyer, and clause “as is, where is” and “with all faults” are critical to the buyers. The arguments above have foreshadowed this issue, thus, it is critical to assess whether the buyers are satisfied with the sub-sale house purchases with the Islamic banks’ home financing products, because they are expected to provide better services for being institutions that derived their foundations from religion – Islam. 3. Dilemma of Sub-sale House Buyer It is important to suggest that in most cases, the sub-sale house buyer has entered the SPA in good faith by appointing the SPA lawyers and engaged with the bank to get financing. Any delay during the process beyond the prescribed time will cause the buyer to pay for penalty which at the first place, buyer is helpless to do anything because the buyer had done the necessary steps within the buyer’s control and beyond that is managed by the SPA lawyer and bank (the officer and bank’s lawyer). Interestingly, buyer is the one who bears the fee for the service of SPA lawyer and will also pay for the monthly financing to the bank (soon), likewise, buyer even pay for the bank’s lawyer legal fee. Thus, tardiness of the transaction will not cause the penalty to be placed on the lawyers (SPA and bank) and bank but on the house buyer! Perhaps, there is some who will argue that buyer can be acquitted if buyer can demonstrate that the tardiness does not cause by the buyer’s action. This argument can be dismissed at once because it would be hard for the buyer to present such evidences and likewise, bank and lawyer can always give various excuses as they are having upper-hand in term of documentations.
4. Empirical Economics Letters , 20 (Special Issue 2) (May 2021) 188 Thus, in the context of Islamic banks, are they supportive enough to the sub-sale house buyers? 4. The Role of Islamic Banks to the Clients of Sub-sale House The Islamic banks are expected to fulfil two sacred roles which are commercially viable and socially responsible. The former role of Islamic banks especially in the case of Malaysia is evidenced with the Islamic banks registered profits year by year. In 2020, most of the Islamic bank that had published their annual reports had managed to achieve profits even though the moratorium was imposed by the government due to the Covid-19 pandemic impact on the economy – they are still making profits (Raj, 2020). On the other end, on the social performance aspects of the Islamic banks, this can be deemed as quite new for the Islamic banks in comparison to the published report on financial performance. Nevertheless, current literatures on the social performance of Islamic banks have depicted that the Islamic banks have achieved this aspect as well. However, this cannot be regarded as conclusive enough because previous literatures are mostly based on the corporate social responsible activities of the Islamic banks. Muhamat, Jaafar and Basri (2017) for instance, assessed the corporate social performance of the Islamic banks according to the four dimensions as prescribed by Carroll (1979) which are: economic, legal, ethical and discretion responsibilities of the firms, in this context the Islamic banks, while Shabana, Buchholtz and Carroll (2017) emphasise on the reporting of CSR. Arguably, further study is needed to explore on the services that the Islamic banks have provided because this is part of the economic responsibility; to provide economic transaction that meet customers’ needs – ultimate aim is satisfaction. It is important to highlight here that the satisfaction of Islamic banks’ customers on their current experience when purchasing the sub-sale house will provide insight and understanding on this situation which leads to the Islamic banks’ social fulfilment as expected by the public. This is the “mission” which is being propagated by the Islamic economists several decades ago (Asutay, 2007; Jan and Khan, 2018). In previous section, this article has highlighted the common issues that need to be faced by the buyer of sub-sale house. Islamic banks as the Shariah-compliant financier that promotes their house financing products and services to the public for the newly constructed house and sub-sale house alike; have they behave differently when assisting the sub-sale house buyer or they are just like their conventional counterparts. The transaction process of sub-sale house is not as straightforward as the newly constructed house because it involves many parties, as explained earlier. Now, Islamic banks as the financier provider have they:
5. Empirical Economics Letters , 20 (Special Issue 2) (May 2021)     189 assisted the client (sub-sale house buyer) with the necessary assistance such as liaising with SPA lawyers frequently; liaising with the current house owner’s bank and lawyer timely; informing and advising client from time to time; and disbursing the funds to the house owner’ bank before the lapse of transaction purchase period (failed to do so will cause the client to pay for penalty) These are among the critical areas that should be addressed by the Islamic banks that provide house financing to the buyers of sub-sale house. The next phase of this research is to engage with the sub-sale house buyers of the Islamic banks to assess the highlighted areas above by measuring their satisfaction on the services delivered to them when purchasing the sub-sale houses. This study posits that, if the Islamic banks failed any from the highlighted concerns above, then the Islamic banks are no different than the conventional banks when providing services to the clients. Philosophically and socially, they are actually failed to live up the spirit of Shariah as epitomises by the maqasid of Shariah as embedded for Islamic finance. 5. Satisfaction of Islamic Banks Products and Services Fayaz (2017) describes that indifferent in terms of customer satisfaction between conventional bank and Islamic bank; customers’ satisfactions are based on the security features, physical and services. Rosland, Hasbullah and Ismail (2017) emphasise that the main factor is service quality, followed by the belief factor and the empathy factor. EngkuAli (2010) suggests the low customer satisfaction of Islamic home financing because it does not meet the requirements and customers’ needs. Rasheed (2015) considers trust, service quality and satisfaction will affect the customer patronage of the Islamic home financing facility. Osman et al. (2009) posit that trustworthiness is important factor influencing the level of the customer’s satisfaction, while Asma (2012) findings depict that significant relationship between trust and customer satisfaction of Islamic banking in Pakistan and United Kingdom. But, Saleem et al. (2011) consider for Islamic house financing, religion is one of the factors influences customer satisfaction to use Islamic banking facilities. Jaffar and Musa (2016) religion is the most important factors that influences Muslims consumers to use Islamic banking products. The previous literatures have highlighted on the factors that influenced the Islamic banks’ clients to patron and use the Islamic banks’ products and services. Nevertheless, in the context of sub-sale house, the outcome might be different. This is the area that is suggested for future study in which we will bridge the issue by discussing the satisfactions of sub-sale house buyers in the future.
6. Empirical Economics Letters , 20 (Special Issue 2) (May 2021) 190 Likewise, the Expectation Confirmation Theory is suggested to be the underpinning theory for future research that will be assessing the expectations of sub-sale house buyers on the perceived performance whether conform to their belief or otherwise (disconfirmation belief) that will lead to satisfaction on the sub-sale house purchases. Diagram 1: Expectation Confirmation Theory 6. Conclusion This conceptual study is an excerpt from a bigger research project that aims to address the sub-sale home buyers’ satisfactions who were financed by the Islamic banks. Based on previous discussions above, the sub-sale house buyers have entered the Sale and Purchase Agreement in good faith but the lengthy process does not really favouring them. Thus, the Islamic banks should assist these sub-sale home buyers because they are not only the banks’ clients who give long-term business to the Islamic banks, but also to live-up the expectation as Islamic financial institution that should always be socially responsible, philosophically and in their daily actions. Acknowledgement We would like to express our gratitude to the Faculty of Business and Management for the research grant (600-IRMI 5/3/DDF (FPP) (006/2019) that has enabled us to complete this study. References Abdullah, N. C., R. Ramly, et al. 2018, Attitudes of Sub-Sale Home Buyers and Vendors in the 21st Century: Legal implications, Asian Journal of Quality of Life, 3(13): 1-7. Amstrong, T. and Block, S., 2007, Beware: Property sold “as is” may come back to haunt the seller, Houston Business Journal, 37(36), 1.
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