Solving the low-cost housing woe
15/05/2004 NST-PROP By Salleh Buang
Units may be priced too high while buyers still face the threat of
abandoned projects.
Two distressing news items caught my eyes over the past few weeks. One
was something we are all too familiar with, although that doesn't make
it any less upsetting, while the other was totally unexpected, if not
altogether baffling.
The first distressing piece of news concerned delayed and abandoned
housing projects. If media reports are accurate, there is apparently a
growing number of ailing projects in various parts of the country.
Perhaps, by comparison, the situation is not as bad as what prevailed in
the late 80s and early 90s. But try telling that to buyers who face the
uncertainty of not knowing when, if ever, their houses would be
completed.
I think it is about time we rethink our stand on the build-then-sell
method and move away from the current practice of sell-then-build, which
has causes untold misery, no thanks to errant developers. An opportunity
to rectify the inherent problems of the sell-then-build system arose
when the Housing Developers Act was being amended in 2002 to become the
Housing Development Act. Unfortunately, Parliament didn't introduce the
build-then-sell system as part of the amendments that were adapted.
Lest we forget, let me quickly recap that the law as it stands today,
implicitly recognises the benefits and virtues of the build-then-sell
system. From the perspective of the developer, under the existing law,
if he has completely built his houses before selling them, he is
not required to maintain a Housing Developer's Account as required by
law of all developers undertaking such ventures on a sell-then-build
method.
Likewise, if the developer has already obtained the Certificates of
Fitness for Occupation for the houses before he sells them, he is no
longer bound by the Schedule of Payments as stipulated in the standard
Sale and Purchase Agreements (Schedule G and H of the Housing
Development (Control & Licensing) Regulations. He can collect the entire
purchase price in a lump sum.
From the perspective of the purchaser, he can see (touch, feel and
examine) the property which he is contemplating to make his home before
paying the developer a single sen. If Dollah, a primary school teacher,
can examine and test-drive a Perodua Kancil he is thinking of buying to
take him to and from work, why can't he be given the same rights and
privileges of seeing and examining his potential new home which costs so
much more?
I am aware that developers are generally not keen on the idea of
implementing that build-then-sell method. However, since the existing
law cannot effectively protect purchasers from inordinately
delayed and/or abandoned housing schemes, the build-then-sell system is
without rival, a better alternative. In fact, I hasten to add that the
Government owes it to purchasers.
The second piece of news that caught my attention came from the office
of the Selangor Menteri Besar, Datuk Seri Dr Mohamad Khir Toyo had
expressed his desire to market still unsold low-cost houses to buyers,
irrespective of whether they are among the poor (and without a roof over
their heads) or the wealthy (who might want to acquire them for
investment).
Although the proposal has since been rejected by the Federal Government,
the whole issue hinted at the fact that the pricing of such houses may
be too high. We were told that low-cost houses in Selangor are pegged
between RM25,000 and RM42,000 and can only be sold to those whose
monthly earnings do not exceed RM1,500. Doesn't the proposal imply that
such properties are still not affordable enough for the very people for
whom they were built? Unless, of course, the reason they are unsold is
because they were built in undesirable locations.
The industry response to Dr Khir's proposal was similarly distressing.
Industry players suggested that if the State cannot sell the low-cost
houses, then it should do away completely with the 30 per cent quota
imposed on developers. They also reiterated that while a developer is
forced to sell a low-cost house at RM42,000, it costs the company
RM50,000 to build it. Consumers Association of Penang president S.M.
Mohamed Idris responded differently. He said (and I fully agree with
him) the Government should reduce the price of low-cost houses (from its
existing level) and at the same time provide more flexible and
'purchaser-friendly' financing to the lower-income group.
To this end, National House Buyers Association secretary-general Chang
Kim Loong came up with a pretty good idea. He suggested that the
Government (or a public agency) buy over the unsold low-cost units and
rent them to the poor on a 'lease-purchase' basis.
