Need For Paradigm
Shift To Realise Build & Sell Concept
Bernama.com
29/9/2004 By Yong Soo Heong
KUALA LUMPUR, Sept 29 (Bernama) -- Tan Sri Lee Kim Yew, one of
Malaysia's successful property developers, says that Prime Minister
Datuk Seri Abdullah Ahmad Badawi's proposal of building houses first
and selling them later will be viable only if there is a paradigm
shift among housing industry players, especially financial
institutions.
He said all concerned must be prepared to change their mindset if
this proposal were to be a success, he said.
Lee, noted for his top-end Country Heights, Palace of Golden Horses
Hotel and Mines City Resort developments, said banks should consider
adopting a more innovative approach to mitigate the risks of housing
projects being abandoned by financially deficient and incompetent
developers.
Banks and finance companies currently play a pivotal role by
providing financing to both developers (bridging loans) and house
purchasers (end financing).
"First and foremost, those who want to be housing developers should
have the financial means to do so. They should not have to rely on
banks to buy the land first to get started and obtain bridging loans
as well to complete the construction," Lee said.
He stressed that developers should be people who have the financial
muscle to own the land first so that they need not become too
financially dependent on banks.
"Second, they (the banks) should adopt what is being practised in
the United Kingdom whereby the banks will determine which
construction company should build the houses to avoid choosing the
wrong contractor," he said.
Under the current practice in Malaysia, contractors are chosen by
developers.
Lee said when financiers get to decide on the contractors, they
would have to choose those with proven track records so that the
projects could proceed without hitches and enable the developers to
pay back their bridging loans in the end.
To effect greater transparency in the housing industry, he also
suggested that the Ministry of Housing and Local Government make it
compulsory for new developers to attend courses just like what Bursa
Malaysia had stipulated for company directors of publicly listed
companies.
"When we have put all these things in place, we can then embark on
the "build & sell" concept and benefit more house buyers," he said.
The Prime Minister had on May 21 this year proposed the adoption of
the "build & sell" concept but the response from many developers has
been lukewarm.
But of late, a number of developers have backtracked and said the
traditional "sell & build" concept can co-exist with the "build &
sell" model.
Ghazali Daud, general manager of Syarikat Sentosa Jaya Sdn Bhd (SJSB),
Kelantan's largest bumiputera developer, is one of those who believe
that the "build & sell" concept is good as it can reduce
uncertainties faced by house buyers due to irresponsible developers.
He said it was bad for developers to abdicate their responsibility
in completing their housing projects after having collected money
from house buyers.
The Prime Minister had said the "build & sell" concept might help
address house buyers' dissatisfaction with regard to timely delivery
and quality of houses.
Under the present system, a buyer makes a booking and pays 10
percent of the sales price upon signing the sales and purchase (S&P)
agreement. He then makes progress payments, normally through a loan
arrangement with a bank, in accordance with the stage of completion
of the house.
The progress payments are released directly to the Housing
Development Account of the project by the bank upon certification by
an architect on the stage of the house completion.
While many developers, including those from the Real Estate and
Housing Developers Association (REDHA), says the current "sell &
build" system has worked well so far, others feel that Malaysia must
move with the times and prevent the recurrence of abandoned housing
projects.
They feel that wrongdoers in the housing industry should face
heavier penalties to prevent the government from having to spend
hundreds of millions of ringgit to bail out thousands of
house-buyers affected by abandoned housing schemes when the money
could have gone to other development programmes instead.
At the most, errant developers only get their licences revoked. No
further action is taken despite the fact that they had not completed
the houses and had collected money from house-buyers whereas such
wrong-doing is tantamount to criminal breach of trust or illegal
deposit-taking.
Penang chief minister Tan Sri Dr Koh Tsu Koon is the latest official
to have highlighted the relatively light penalty on offenders.
Earlier this week, he said that errant developers should be
seriously dealt with, especially those who colluded with architects
and engineers to short-change buyers.
Saying that there had been cases where architects reportedly signed
for 100 percent completion of a housing project whereas the project
was only about 70 percent to 80 percent completed, he said such
culprits were usually fined a small amount and, in most cases, such
action only led to a temporary suspension of the developer's
licence.
"This is not correct because it is a case of criminal breach of
trust," Dr Koh said.
Wan Mohd Dzulkifli Wan Daud, chairman of REDHA, Kelantan branch, in
supporting the call to punish errant housing development companies
recently suggested that swift legal action be taken against company
directors whose companies failed to complete housing projects.
The problem of abandoned projects is rather alarming. At the end of
January 2004, there were 172 abandoned housing projects nationwide.
According to Lee of Country Heights, part of the blame should go to
people with little experience in housing development or "housing
developers wannabees".
A developer, he said, has to take many factors into consideration
before starting a project like location, landscape, aesthetics,
population density, traffic flow and general economy of the area.
"It is not as simple as just finding a piece of land and then start
building houses," he said.
-- BERNAMA |
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