That scheme envisaged that monies paid for the house will be transferred to the developer only after everything is done, including a certificate of fitness (CF), to enable the purchaser to move into the house.

Some developers maintain that buyers are fully protected right now because any advance payments by the purchaser is released to the developer progressively only after an architect verifies that the house has been completed to a specified stage.

At first glance, it may seem like house buyers are protected because they pay only for the amount of work already completed. And it seems to be a fair arrangement for both. But it's not. Here's why:

If the house is 90% complete, then 90% of the purchasers' money would have been handed over to the developer. Let's say the developer chooses now to abscond with the money or for some reason or other is unable to complete the project.

What happens to the house buyer then? Is he expected to complete the construction of the house himself? What about the infrastructure? Does he have to get the CF himself? What does he do when he has to pay the bank interest and instalments but he has no place to move into?

The current system does not give sufficient protection to house buyers. The question is, would the build-and-sell approach? Unquestionably yes, because the house will be there, with the CF and all amenities. The purchaser will just have to decide whether he wants to buy.

Here you have some developers howling in protest — only the big boys have the financial clout to do that, they argue. Surprisingly, even some big boys give that same reason — wonder why.

Is build-and-sell the only way then? No, it is not. It is possible to buy from a plan and still have the house buyer protected. There is a cost, of course, but protection always has. Here's how (this has been tested in countries such as Australia):

Payment can still be credited to the account of the developer based on the percentage completion but a trustee account will be created where the advances will be put. The money in the trustee account, which will earn interest in the interim, will only be transferred to the developer after he delivers the house in contracted condition to the purchaser.

If the developer cannot complete the project for any reason, the money will be returned to the purchaser in full, together with interest, and the sale will be nullified. The purchaser loses some money because the interest from a savings deposit will be lower than the interest he pays the banks for the loan but that is far better than losing all his money, owing the bank money, and not having a place to stay.

Simple? Yes. So why has it not been done here? One argument, again by some developers, is that it increases the cost of houses. Yes, it does but not by all that much. In any case, the cost can be easily passed on to the buyer.

To take an example, assume a house costs RM100,000 and will take two years to complete. Assume also that the developer's construction cost is RM50,000, which he finances 100% from the banks at 8% (low since the loan is secured against payments advanced to the trustee account).

Since the developer draws down the RM50,000 over two years, his interest cost will progressively increase and will be around 4% (half of eight) a year on RM50,000, equivalent to 2% a year on RM100,000. Meantime, the trustee account will earn a deposit rate of, say, 3% a year on a sum which progressively increases to RM100,000 over two years or roughly 1.5% a year on RM100,000 over two years.

Offsetting the income from the trustee income, against the expense on the bridging finance, results in 0.5% a year on RM100,000 or 1% over the two-year construction. In other words, the house costs 1% or RM1,000 more. Build this into a 20-year repayment period and it amounts to under RM10 a month — small price to pay for iron-clad protection. (Please note that these are rough calculations and not exactly accurate.)

If things were so simple (they are!), why is there no such protection? Developers will oppose any arrangement which puts greater responsibility on them. The trustee account system means they must commit to the project all the way and will stand to lose everything if they don't deliver, which is the way it should be.

The current system allows them to get away with a lot. If I have received 90% payment and my profit margin is 30% of the cost of the house, I have already made 20% even if I can't complete the project. In fact, if things get too hot, I won't complete the project and I can still walk away with profit!

When you have something so good for so long, obviously you are reluctant to give it up and will offer all kinds of excuses and even pressure to keep the benefits. It is up to the government, specifically the Housing Ministry, to recognise that there is a way to protect house buyers which it can quite easily implement, despite developers' protestations.

If such protection is not forthcoming soon, the house-buying public will be perfectly entitled to ask why. We reproduce here the last paragraph of the article we wrote one and half years ago: "The next thing we need is for the authorities to have the courage, the political fortitude, the moral rectitude to resist temptation, and genuine concern for the rakyat to implement this fully and fairly. Is that too much to hope for?"

We hope, with changes that have taken place in the interim, it is not.