The Real Risks Behind Rebates and Inflated Valuations

Johor’s property cycle is gaining pace, but the credit risks begin upstream of underwriting. In the October 2025 PEPS Ventures webinar supported by ValuationXchange, Dr. Lee Nai Jia (PropertyGuru Group) and Sr. Samuel Tan (Olive Tree Property Consultants) highlighted how marketing rebates embedded in Sale & Purchase Agreement (SPA) prices, misused “indicative values,” and offline, non-traceable workflows can distort collateral quality for banks in Malaysia.

Market context matters for risk models: demand around major infrastructure (RTS/JS-SEZ) has pushed certain sub-markets higher, e.g., serviced apartments moving from ~RM800 to ~RM1,200 psf and commercial land from ~RM700 to ~RM1,200 psf; while Johor’s residential overhang has fallen (≈3,030units), signalling faster price transmission. Without disciplined, net-of-rebate evidence and transparent processes, inflated benchmarks can migrate into comparables and loan-to-value (LTV) decisions.

What the webinar surfaced (for risk, credit & policy teams)

1. ‍Rebates that overstate collateral.
   When developer incentives are bundled into SPA prices, headline values can exceed true economic consideration. If such transactions enter datasets unadjusted, comparable selection must explicitly account for net-of-rebate pricing to avoid LTV drift, especially in micro-markets near RTS/SEZ where appreciation has been material. Bank implication: require net-of-rebate evidence and document adjustment rationale inside the credit file to protect model integrity and loss-given-default outcomes.
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2. “Indicative values” used as negotiation anchors.
   Indicatives are useful waypoints but not substitutes for full, MVS-aligned valuations. When pre-inspection figures are treated as targets, they can anchor teams to non-evidenced numbers. Bank implication: codify system states (Indicative vs Full), keep lender–valuer instructions and discussion in-platform with audit trails, and ensure credit decisions reference defensible reports, not preliminary guides.‍
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3. Fraud & process-gap vectors.
   Document falsification, impersonation, double-mortgaging, fund diversion and inflated SPA/valuation figures thrive where activity is scattered across email, chat apps and spreadsheets. Bank implication: move identity, documents, instructions and valuation chat onto a controlled platform to create tamper-evident records, strengthen first- and second-line testing, and accelerate independent reviews.

How ValuationXchange helps banks de-risk without slowing business

• End-to-end transparency: Centralise requests and preserve time-stamped, attributable lender-valuer conversations to reduce undue influence and     improve auditability.‍
• Comparable discipline: Structured capture of net-of-rebate evidence and rationale notes to defend collateral sizing and curb LTV drift.
• Stage governance: Clear workflow states for Indicative vs Full, aligned to Malaysian Valuation Standards (MVS), so preliminary figures don’t leak into policy decisions.
• Panel oversight: Turnaround-time, SLA and variance analytics to spot outliers, strengthen panel governance and improve portfolio resilience
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_{‍This article is part of our Johor webinar series. For cross-border demand dynamics, see Series 1 - “Singapore’s Influence on Johor Property: What Banks and Valuers Must Watch.”}

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