05/06/2004 Published in NST-PROP A Buyer Watch Article by National House Buyers Association

Revamp of present delivery system long overdue

The National House Buyers Association (HBA) lauds Prime Minister Datuk Seri Abdullah Ahmad Badawi's suggestion that developers should build-then-sell and 'have funds in hand before embarking on projects".

We are touched by his concern "that people who have paid for houses later found the project abandoned".

It has been our suggestion  that build-then-sell (BTS) be the system of house delivery. Through the years, buyers have been consistently disappointed with the quality of their completed houses in addition to uncompleted projects, and in the worst-case scenario, developers abandoning projects altogether. It is unacceptable that prospective buyers have to rely on developer's reputation, honesty, goodwill and financial security to deliver their houses. It is time to take a proactive step to protect future buyers.

Objections to and reasons for not implementing BTS have been put up by some in the industry. This is only to be expected as the present method of delivery immensely favours the industry and it will fight 'tooth and nail' for the status quo. There bound to be arguments and confusion. We hope the Government has the will to see this through.

A revamp of the present system of delivery is long overdue and because it is mooted by the nation's chief executive, it deserves the full support of politicians and the rakyat.

Having said that, the BTS concept is probably too big a paradigm shift. Hence, what we propose is a variant of the concept to be adopted, leading to full embrace of the system.

The BTS variant

We propose buyers pay 10 per cent upon the signing of the Sale and Purchase Agreement (SPA). The developer's lawyer who is also the stakeholder will then hold this payment and the developer will have no access to it. The buyer will not make any further payment until the house is completed and issued with title and Certificate of Fitness for Occupation. Only then will the buyer be required to make full payment.

In the event that the developer does not complete the project within the stipulated timeframe, the buyer will have the right to rescind the contract and have the deposit returned together with any interest that may have accrued.

With this system, we believe more people will be attracted to buying houses and this will benefit developers.

We see this concept as an equitable and practical variant of the absolute BTS concept. The vendors will be assured of the number of buyers who have paid the 10 per cent and they can concentrate on building good houses and delivering them in good time. The buyers, on the other hand, will (not) be exposed to the risk of getting a house with substandard workmanship or face buying into an abandoned scheme after having paid the bulk of the cost.

The financing for construction is the responsibility of developers. Buyers should not be dragged into the financing aspect of the construction. They should not be made to carry the financial burden or should any risk for developers. More crucially, they should not be made to carry the risks of the project not being successful.

The overriding principle is that developers should not be allowed to collect payment and reap profit from a venture before they even deliver the products. We believe the future of the industry and the well-being of the house buying public lie in the reform of the present mode of delivery.

We agree with the the Prime Minister's statement: "It is not right to take money first before the house buyers can get their house."