Laws alone are not enough
NST 29/10/2005

There's nothing new in the issues raised by the National House Buyers Association (HBA) in Property Times last week ("Pillory the rogues", Oct 22, 2005). This debate has been going on for 40 years and each time a housing scandal arises, new legislations are put in place to police the industry.

After all these years, we have to accept that legislation alone cannot stop rogue developers or safeguard the interests of house buyers. It is futile to go on making more and more rules. It is impossible to plug every hole in the system and this has been made clear by the recent, disturbing revelation by the Ministry of Housing and Local Government. 

There are 695 rogue developers in the country meaning that 15.5 per cent of all licensed developers
are cooks. This is no small number. Up to 2004, 227 & housing projects value at RM7.3 billion have been abandoned, affecting more than 50,000 buyers. This translates roughly to a quarter million people.

Once can only guess how many ordinary, hardworking Malaysians have lost their life savings over the
years as a result of the inadequate protection the Government provides buyers.

"Even with the best of intentions, it is impossible for the Government to stop housing cheats.

Legislation without adequate supervision and enforcement is useless. The Government simply does not have the resources to enforce the plethora of laws that apply to the housing industry.

The only relief that can be given to buyers in the event they are duped by a rogue developer is to ensure they do not lose build-then-sell system,10:90, or whatever. 'The bottom line is that purchasers' monies must be safeguarded until the titles to their houses are handed over.

A 10:90 system, where the buyer puts down a deposit of 10 per cent of the house price as booking fee with the balance - now released as progress payments - held in- escrow until the house is delivered, will give buyers protection.

A forfeitable deposit will discourage buyers from frivolously entering into a purchase agreement.

This system will not affect the viability of a project and it can be made flexible: If 10:90 is unworkable, then perhaps it could be 20:80.

The Real Estate and Housing Developers' Association (Rehda) should desist with its red herrings. Its claim that house prices will go up by 30 to 60 per cent if the build-then- sell concept is made mandatory is not speculative, but alarmist.

Other diversions, such as developers having to "subsidize low-cost houses and infrastructure", is plain dishonesty. These costs are'" already factored into the house price and it is the buyer who subsidizes these, not the developer.

Financial institutions have cleverly kept their heads below the parapet as this debate rages. They are, in fact, complicit in the housing scandal.

Banks make a lot of money on housing and they see buyers as safer customers than developers.

Whether a substandard house is delivered - or even if no house is delivered buyers will have to service their loans. That's all that matters to the banks. This is irresponsible and unconscionable. Banks must be made to bear the risks, just as developers.

It is wrong for banks and developers to profit on the backs of house buyers who not only bear the financial risks but also finance the construction.

It would be naive to expect Rehda to accept change without putting up a fight, for it is a body with vested interests.

The housing industry's aversion to change is nothing new, and neither is it exclusive to Malaysia or the industry.

In the United States, car manufacturers cried foul when forced to comply with safety and environmental legislations. Mining and quarrying companies did the same when pressed to adopt best practices. And they all prophesied price increases, job losses, catastrophe for the industry and economic doom for the country.

However, the sky did not fall when changes were eventually forced on them. The companies adjusted
and in many ways, became more efficient and profitable. They also became better corporate citizens.

The housing industry in Malaysia is no different. It will adapt to the 10:90 system once it is adopted.

Developers will become leaner, meaner and more efficient - and ultimately more profitable. Undoubtedly, there will be some disruption to the industry, but this will only be temporary.

The housing industry's status quo cannot continue.

Rehda's plea for sell-then-build and build-then-sell to coexist is also a non-starter. Rehda has advanced every argument it can muster as to why the status quo should remain except to answer the fundamental question: "Why should house buyers risk their money while developers take the profit?"

The sheer insouciance Rehda shows for consumer rights is underlined by its refusal to countenance any change to the system.

Enough said. Either Rehda works with the Government and HBA (and the banks too) on a system that is fair to consumers and workable for developers, or be left to rue its intransigence. Forty years is a long time for Malaysians to wait for meaningful changes to the industry. The time has come to act.

Businesses have a social responsibility be it environmental, health and safety or just plain consumer rights. If Malaysia aspires for developed nation status, we must also have developed nation consumer safeguards for our citizens as well.

YlN EE KlONG, Batu Ferringhi, Penang