Published on 11 July 2025 by Joseph Wong, StarProperty.my

Overview

Fraudulent mark-up loans—where property valuations are intentionally inflated—are emerging as a serious concern in Malaysia’s property sector. Despite being illegal, these loans remain widespread, driven by affordability pressures, speculative behavior, and systemic weaknesses.
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What Are Mark-Up Loans?

A mark-up loan involves artificially inflating a property's valuation to secure a higher loan amount than its true market value. These inflated valuations often involve collusion between buyers, sellers, agents, and occasionally, valuation professionals. The extra funds—often described as "cashback"—are used by buyers to cover down payments, renovations, or outstanding debt.

Parties involved may face serious criminal charges such as fraud, cheating, or abetment under Malaysia’s Penal Code (Act 574).
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Key Drivers Behind the Persistence of Mark-Up Loans

1. Affordability Pressures
   Rising property prices outpace income growth, pushing buyers to seek risky financing options.
2. Speculative Activities
   Flippers use mark-up loans to minimize upfront capital, betting on rapid resale gains.
3. Desire for Extra Liquidity
   Promised "cashback" entices buyers who intend to fund renovations or investments.
4. Unethical Advice
   Some advisors or agents mislead buyers into believing mark-up loans are acceptable, downplaying the risks and illegality.
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The Normalization of Unethical Practices

Shocking as it may seem, some property listings openly promote mark-up and cashback schemes, making them appear commonplace. Driven by commission incentives, a number of agents—and in rare cases, valuers—compromise ethics.

As stated by Subramaniam Arumugam, President of PEPS, "The valuation profession is highly regulated with practitioners bound by strict standards. However, we cannot overlook instances of collusion."
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Industry Voice: Strengthening Governance via Technology

Joe Thor, Executive Director of ValuationXchange, weighed in on the systemic solution:

“Such fraudulent activities violate banking regulations and ethical standards, constituting financial fraud by misleading lending institutions. However, despite stringent regulations and penalties, mark-up loans persist due to deeper systemic issues in the property financing ecosystem.”

He emphasized ValuationXchange’s role in combating fraud:

“Beyond using the tools we’ve designed to ensure greater compliance with the Malaysian Valuation Standards, we have developed a platform crucial to helping banks strengthen lending decisions with accuracy, directly from professional valuation practitioners. By enabling greater compliance and mitigating fraud risk before loan disbursement, we can collectively build a more stable and resilient property market in Malaysia.”
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Why Mark-Up Loans Are Risky for Banks

In case of borrower default, banks face losses because the inflated loan amount exceeds the actual property value. MIEA’s former president, Tan Kian Aun, notes that “the practice distorts market pricing as it artificially inflates prices, pushing affordability further out of reach for struggling potential home buyers.”
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Systemic Risks and Digital Gaps

Manual valuation processes—reliant on too much human judgment—lack transparency, introduce audit trail weaknesses, and create fraud opportunities.

Moreover, reluctance among banks to embrace digital platforms stems from concerns over initial costs, internal resistance, and a preference for short-term KPI results.
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Moving Forward: Collective Action Required

Curtailing mark-up loan fraud requires cooperation across stakeholders: banks, regulators, lawyers, property professionals, and consumers. Industry campaigns are vital—educating buyers about legality, clarifying the consequences of fraud, and encouraging banks to adopt secure digital platforms that enhance valuation transparency and regulatory compliance.
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Closing Thoughts

Mark-up loan fraud remains a significant threat to housing affordability and financial stability in Malaysia. By leveraging technology and reinforcing ethical standards, platforms like ValuationXchange aim to restore integrity and resilience to Malaysia’s property financing space.

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Why fraudulent mark-up loans persists, StarProperty.my, 11 July 2025, by Joseph Wong.