Helping buyers get a better deal

New Straits Times 10/05/2006

REFER to the Government’s decision to review the 18- month warranty period for defects in newly-built properties.

SP Setia’s move to double the term of its warranty period is welcome.

Future house-buyers like myself are faced with insufficient information when choosing buying a property.

SP Setia simply wishes to differentiate itself from "mediocre" developers by signalling to the consumers that the quality of its work is superior. It is so confident of its work that it is offering an extended warranty.

If all developers extend their warranty period to three years, it will make it more difficult for good developers to show what makes them different.

A potential solution to this problem would be to keep the guarantee period to a minimum of 18 months and allow developers to offer extended guarantees within their financial comfort zone.

This would enable the consumers to differentiate the good from the mediocre.

The Government’s role in this would be to introduce legislation that ensures that developers who choose to offer extended warranties have the means to do so and that sufficient provisions for defects are made by these developers.

This provision could potentially be in the form of a bank guarantee which ensures that the developer is able to meet its liabilities should defects arise.

Such provisions would enable developers with good credit ratings to provide extended guarantees, while mediocre developers would be unable to do so.

This might benefit developers with big bank balances in the short term but it would ultimately give smaller developers an incentive to minimise defects on their properties.

Overall, such measures would increase competition in the housing market and be of greater benefit to the consumer.

H.R
London