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Once again there is some discussion on the merits of a house buyer paying in full only when the house is ready or paying 10% of the purchase price when the sale and purchase agreement (SPA) is signed and the balance when the house is completed.

There can be little complaint against the idea.

At first sight it appears to be in the interest of the buyers as the balance will only be paid when the house is completed.

The idea also envisages that the 10% be held by a stakeholder to be paid to the housing developer together with the the balance 90%.

A reader wants to know why this approach is not adopted.

This approach is not new as it has been discussed on numerous occasions. It is what is otherwise known as the "build and sell" concept as opposed to the present way of making progress payments to the developer starting even before construction has commenced.

The build and sell concept would certainly be the more beneficial approach for the house buyer because in such a situation a house buyer would be assured that the property purchased exists.

In such a scenario the house buyer would be in a similar position as a buyer of a car or other equipment whereby he can inspect the product before buying.

As a matter of fact the purchaser would be in the same position as a house buyer who is buying an existing house.

Where such an approach is used the house buyer would have the property registered in his name in exchange for the payment of the price.

Problems such as defects in workmanship and materials would continue to exist even if the transaction is conducted in this way.

Viewed from the point of view of the housing developer such an approach creates a different perspective in terms of funding of the project.

It would mean that the developer must have his own financial resources to buy the land to build the houses which are to be sold. This would mean the developer uses his own money or borrows from a financial institution.

The inevitable question that would arise would be whether the developer would want to enter into an SPA until the houses are ready or almost ready for sale.

If the developer has financial resources it would be better to build the houses and sell them only after they are ready.

The prices could then be fixed at that time given that landed property generally appreciates in value. The developer would be better off selling the houses at a higher price when they are ready.

Of course if the property market were to collapse the developer could end up losing money. But this is a risk that the developer may want to take if such an approach is adopted.

However this alternative approach could result in other implications for all involved with different and results for all parties.

Firstly it would mean that only developers who have their own capital or are able to secure loans from financial institutions to undertake build-and-sell housing scheme would be able to stay in business.

Furthermore some financial institutions may be reluctant to provide the loans for such build-and-sell schemes.

This could be because the financial institution would only have recourse to the developer and the land on which the houses are built as a security for the loan extended.

On the other hand, where financing is through the house purchaser where the property is charged in addition to the liability of the individual borrower, the risks for the financial institution is spread over a much larger pool of people whether the houses are built or not.

If such an idea were to be implemented it could result in a small number of housing developers in existence. If this happens then there could be a reduction in construction which could have an impact on the economy and result in an increase in house prices.

The issue is therefore like two sides of the coin. It has advantages and disadvantages.

No one particular approach can be said to be better in any specific situation. What is foreseeable is that the present approach of paying progressively will continue with opportunities for those developers who build and sell proving to the public that what they offer is a superior alternative.

In the end public sentiment and market forces and other related factors would determine the acceptable approach.