Sabah housing developers against build first concept
25/05/2004 Daily Express

Kota Kinabalu: The Sabah Housing and Real Estate Developers Association (Shareda) is against the build first, sell later proposal by the Federal Government for fear developers in Sabah will come into hardship.

Its President, Haji Abu Bakar M Yahya, said Shareda felt it was not timely for such a concept to be implemented, especially in Sabah, as most of the developers here are not that financially strong.

He said the association welcomed the Prime Ministers concern on the need to prevent the incidence of abandoned housing projects, which had resulted in house buyers being victimised.

Datuk Seri Abdullah Ahmad Badawi had said on Friday that the Government was studying the possibility of imposing this concept on housing developers.

The association itself is sensitive to upholding buyers rights and protection, Abu Bakar said, adding Shareda had been doing its part in educating and reminding members of this principle which makes good commercial sense in the face of fierce market competition.

He cited that most of the recent cases of abandoned housing in the country had occurred in the wake of the 1997-1998 financial crisis, which actually saw developers becoming victims as well.

He said the housing laws in the country were very comprehensive and that the housing industry in Malaysia is the most regulated in the region.

In this respect, Abu Bakar said Shareda believed the concept would not be the remedy to overcome the problem and instead might result in a situation that would not be better off for buyers and the country as a whole.

There are so many constraints for us to apply the concept in Sabah, he told reporters at a press conference here Monday.

Among the constraints, he said, was that since almost all of the developers in Sabah are not big timers, they still depend highly on banks to finance housing projects.

Therefore, small time developers will find it difficult to survive and do projects because of not enough funds to implement the build first, sell later concept, he said.

Abu Bakar pointed out that this was what Housing and Local Government Minister Datuk Ong Ka Ting had stated as well - that 90 per cent of the developers would not be able to build and sell because they are smalltimers and lack the financial capacity.

However, it is these small developers who provide for the majority of housing in the market compared to the 10 per cent bigtimers who may be able to build under the proposed concept.

I can say none of the developers falls into the 10 per cent category, he said.

It is also Sharedas view that restricting the 90 per cent small developers from housing development would result in, among others, an acute shortage of housing supply that would inevitably lead to overpricing.

It would also encourage a cartel among the big players who will then be able to control supply and prices. The remaining developers may also not be keen to go into the lower-end housing sector where profit margins are not as lucrative, he said.

Apart from that, it would bring a negative impact to the construction industry, building materials manufacturers, banking and finance industry and the professional consultancy service sector due to the downturn in the construction sector.

Shareda believes that the build-and-sell concept would eventually be adopted out of necessity as is already evident now, with the bigger housing developers applying this concept as part of their sales strategy and branding effort.

But there are also housing projects that are fully completed but not fully sold, he said, adding this showed the industry was not ready yet to accept the proposed concept.

It is thus better to leave this matter to the market forces to decide. Buyers are now better educated and very discerning and they will be able to decide which housing project or developers have the requisite quality and reliability attributes.