Builders have to adjust to meet public expectations
28/09/2005 The Star Comment By V.K. CHIN

THE very mention of the build-and-sell concept is enough to send a shiver down the spine of the property sector. This is a policy quite alien to the local industry, which has been allowed to sell units before starting construction.

The developers have been so comfortable with this practice that they have taken it for granted that the good times will continue.

But the Local Government Ministry and its minister want to put a stop to this practice to protect the buyers.

What is worrying to the developers is that Minister Datuk Seri Ong Ka Ting has proposed a 10:90 formula whereby prospective buyers need only pay a 10% deposit while their units are being built. The deposit will be held in trust until the completion of the project.

This system is good as buyers are not committed and will need to decide only after they are satisfied with the completed units. Otherwise they can opt out of the scheme without facing huge financial losses.

At present, they are required to obtain a loan to make progress payments and if the project should be abandoned by the developer, due mostly to an economic downturn or financial difficulties, they will still have to continue paying their lenders.

Over the years housing projects comprising tens of thousands of units have been abandoned by irresponsible developers.

This is causing hardship to the buyers who have to bear the financial burden without owning the property.

The Government had to spend billions of ringgit to rehabilitate those projects that could be salvaged so that the buyers would at least be able to have a house in the end.

The negative aspects of the build-and-sell concept will mean more expensive houses, and less projects may be started as developers are not prepared to take the risk of huge financial losses should buyers shun their schemes.

This will definitely reduce the number of players as only the big developers have the financial resources to implement the new method in the construction and sale of houses and apartments.

This may not be a bad thing as there are just too many developers entering the market with neither the expertise nor resources to do a good job except for some small parcels of land.

The property sector has played an important role in economic growth in the past few decades and any slowdown will have a serious spillover effect as many other industries are also dependent on this sector.

It is almost certain that the Government will change the way the industry is doing business, and the developers will have to make the necessary adjustments to meet public expectations.