Nature of the game
NST-PROP 11/09/2004 By Andrew Wong

There's a well-thumbed foot-high stack of papers sitting on my table made up of what could well be every report made on the proposed introduction of the build-then-sell method of housing delivery.

Since May, when Prime Minister Datuk Seri Abdullah Ahmad Badawi made the call, I knew it was going to be a big thing and not some flash in the pan statement for the benefit of gaining political mileage. Since he took office, that hasn't been his style.

True enough, after the initial furore from groups supporting buyers of abandoned and defective housing simmered, it flared up again when Abdullah said recently that a proposal made by the Rating Agency of Malaysia for the introduction of a 10:90 formula for house purchase transactions could be considered.

The formula, which involves buyers remitting the 10 per cent downpayment into a stakeholder account and paying the balance only upon completion of their units, means they can look forward to restful nights as they wouldn't have to worry if their acquisitions will be abandoned. For developers, though, it essentially means a COD - cash on delivery - payment term which would require them to either have deep pockets or large loans to stay in the business.

It is a reinvention of the way primary housing stock has traditionally been built and disposed of, and while it can bring relief to purchasers, one has to wonder if will benefit the whole development cycle and make a positive impact on the economy. There are doubts.

Developers didn't dare shout too loud about protecting the current system of selling before building when the issue was first raised in May and the reason can be understood. It would have gone against the grain of the popular votes and painted them deep into a corner as money-minded capitalists only interested in quick returns at the expense of unsuspecting buyers.

I tried in an editorial shortly after Abdullah's statement to explain that for as long as domestic property development is one of our country's main drivers; for as long as the Government's agenda is to remove squatters from the urban landscape and yet ensure proper roofs over the heads of the populace; and for as long as we want to keep house prices down, we can't afford to adopt anything else but the sell-then- build approach, no matter how much it hurts.

It was a duck shoot. I had flabbergasted NGOs all over me and in my inbox. I was seen as 'one of them'. I had sold my soul and failed to take up the right cause. I shut up for three months on the subject.

But I'm back. I've contemplated the delivery system from various angles, debated it among industry players as well as consumer groups and in all honesty, still can't see the build-then-sell method at this point of our country's development as being the common cure to the housing industry's many ailments.

So I'm taking one more stab at it - and opening myself to more derision perhaps - in today's centrespread.

My take is that the build-then-sell approach is only workable in a few situations, such as when developers with small niche schemes can simply 'plug' into an area's existing infrastructure with minimal cost. For ventures requiring massive earth shifting and the manufacturing of miles of roads, drains and other essential support services, they can't afford to adopt the same system no matter how fat their coffers are. For the amount of risk they would be exposed to, they might as well undertake another kind of business that can pay better returns.

But that's only my view. To create balance, also in this issue is the first in a series of articles by the National House Buyers' Association, on every reason why the build-then-sell method should and could be the new way to buy houses?.

My friends at the voluntary NGO have several valid arguments, and although we might differ in opinions, we both have the same goals - to make our housing system one that can make our lives better, not worse.

Should such an attitude be employed throughout the industry, it's only a matter of time till an acceptable solution is found.