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.
