Let developers bear the risk

NST 10/02/2006 By BRIG JEN (R) DATUK GOH SENG TOH, Deputy president, National House Buyers Association

I WOULD like our readers to spare a thought for the thousands of victims of abandoned housing projects.

They must be suffering varying degrees of financial hardship having lost their hard-earned savings and being lumbered with having to pay interests for their housing loans.

Unlike victims of other catastrophes whose plights are dramatic and sometimes life-threatening, the plight of these "unsung" victims of our housing delivery system, goes largely unnoticed. They suffer in silence.

I believe that their plight can certainly be avoided if we had not adopted the present system of progressive payment in buying houses.

The system compels buyers (or their banks if they have secured a loan) to make progressive payments to developers during the various stages of construction based solely on the developers’ engineers/architects’ certification.

The hazards of such a system are plentiful. For one, an unsuccessful project (ie, an uncompleted house) is of absolutely no use/value to the buyers.

The fact that they have made partial payments only worsens the situation. They are encumbered with a real legal muddle.

Some housing loan agreements remove the right of house buyers to stop the banks from paying developers, no matter what.

It is distressing to note that we have nurtured a system of house-buying that allows such a large number of absolutely innocent house buyers to get "convicted" and to pay such heavy "penalties" for purchasing a house.

Isn’t it time we abandoned the present progressive payment system so that developers are not paid until they have completed their projects?

There are many other ways for this to be achieved without having to adopt the absolute build-sell mode. The 10-90 system that was mentioned by the Minister of Housing is certainly a viable mode.

We strongly believe that the 10-90 system will totally insulate house buyers from the business risks that should rightfully be borne only by the developers and their banks.

In brief, house buyers pay 10 per cent upon signing the sale and purchase agreement. The balance 90 per cent is payable upon completion of the houses.