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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.

 

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