Give us a new payment system

19/05/2006 NST

WE refer to "Dream homes now nightmare" (NST, May 15). We sympathise with the buyers of Diamond Creek Country Retreat. This tale is an all-too-familiar one heard everywhere.

In fact, thousands of house buyers are suffering in silence after paying for houses that have been abandoned by developers for various reasons.

The housing industry must be the only enterprise where, in the event of failure by a developer, the customers are the ones who bear the worst losses. They are weighed down with debts to the bank through the housing loans that they have taken. The interest piles up by the day. They continue to pay rent for their rented houses and are stuck in a legal quagmire. In many cases, a solution is nowhere in sight.

This situation is the result of the present system of sell-then-build (progressive payment). The system is flawed in many ways. Chief among them is that developers are paid before they deliver the product. Buyers pay progressively as construction progresses. An incomplete house is not only of no use to a buyer, it is a serious encumbrance.

Even a 100-per-cent completed house is of no use without a certificate of fitness for occupation because the buyer is barred from living in it.

With ten of thousands of victims of abandoned projects suffering in silence, the Government would do well to get rid of the present flawed system and replace it with one that insulates buyers from the devastating effects of abandoned projects.

No system can guarantee that there will be no more project failures, just as there is no guarantee against business failure. However, the 10-90 system that has been discussed would, to a large extent, insulate buyers from the fallout of abandoned projects. It will place the business risks where they should be: on the developers.

The progressive payment system should be discarded. It should not be allowed to co-exist with any system. If any co-existence is proposed, it should be the 10-90 concept. Only then would the Government not have to grapple with the problem of helping victims of abandoned projects.

Chang Kim Loong, Secretary-General, National House Buyers Association