Why "build-and sell" a better housing plan

28/05/2004 NST

KUALA LUMPUR, Thurs. - Cases of buyers being left stranded due to housing projects being abandoned by developers will be a thing of the past if the "build-and-sell" scheme is adopted by the Government.

This is the response from the National House Buyers Association (NHBA) to Prime Minister Datuk Seri Abdullah Ahmad Badawi's statement last Friday that the Government was studying the possibility of making housing developers build houses first before selling them.

"The overriding principle of the proposal should be that the developers should not be allowed to collect payments and to reap profits before they deliver their products.

"The scheme will ensure that only responsible companies are involved in housing projects," NHBA secretary-general Chang Kim Loong said.

"According to the 2002 statistics from the Ministry of Housing and Local Government, the number of abandoned housing projects nationwide was 544, involving 125,649 units of houses worth over RM9.4 billion and affecting 80,070 buyers ," Chang said.

"The NHBA's stand is that developers must have sufficient funds to be serious players in the housing industry," said committee member Brig-Jen (Rtd) Datuk Goh Seng Toh.

"Under the scheme, financial institutions will provide housing loans only to projects which are viable, irrespective of the size of the company," Goh said in response to concerns that small developers would lose out due to the lack of financial capability to build first and sell later.

On fears of an increase in housing prices due to low supply, Chang said the safeguard of owning a completely built house would override any price hike.

Acknowledging that the scheme was probably too big a change, the NHBA has proposed a variant to the "build-and-sell" concept, where buyers pay 10 per cent upon signing the sale and purchase agreement as down payment to be held in trust by either the buyers' or vendors' lawyers.

Thus, the developers will have less reason to abscond as they will have no access to the money and buyers will only have to pay the balance of the purchase price once the house is completed and the title and certificate of fitness for occupation have been issued.

"Developers are assured of the number of buyers who have paid the down payment and can concentrate on building good quality homes and delivering them on time.

"Buyers, on the other hand, are not exposed to the risk of sub-standard workmanship, late delivery or abandonment," Chang said.

The NHBA is also willing to have an open debate, chaired by the Housing and Local Government Minister, with the Real Estate and Housing Developers' Association (Rehda), financial institutions and the relevant organisations to iron out any problems.

"Nothing has been done since Nov 7, 1991 when we had the two-day seminar on the `build-and-sell' scheme.

"Now, we are urging everyone involved to discuss the matter further."