The merits and demerits of build-and-sell concept
The Star 07/06/2004 By S.C. Cheah

MANY developers must have jumped up when Prime Minister Datuk Seri Abdullah Ahmad Badawi recently said that the Government would find the best way to implement the build-and-sell concept.

After all, they have been so used to the sell-and-build way of doing business that any other way may be a hard pill to swallow. The Real Estate and Housing Developers Association Malaysia (Rehda), as expected, has urged the Government to study the implications of the build-and-sell concept.

Rehda president Datuk Jeffrey Ng Tiong Lip had said that the concept would result in a significant reduction in housing production and market players and would also lead to severe social and economic implications.

Actually, the two concepts have both their merits and demerits depending on whose interest one is talking about. Obviously, house buyers would all like to physically examine the property, be it a house, shop office or retail lot before we sign on the dotted line.

The Seri Damai houses are a form of build and sell concept as they were completed and some of them are awaiting buyers.

It would be an ideal way of buying property. If given the chance, we may even like to test out the bathrooms first like pouring water over the floor and wait and see whether the ceiling below the bathroom leaks. Or better still, buyers may like to have a kind of machine or equipment to detect any hollow walls. There have been some cases in the past where construction workers plastered the walls with newspapers and other rubbish.

The above examples may sound rather ''extreme'' but that shows how bad some properties can be built and it would be too late if one were to discover the defects after having committed oneself financially. Although the defect liability period has been extended, house buyers know all too well that many developers seem to take ages to rectify the defects if at all.

There are still many cases of projects being abandoned and purchasers left in a lurch.

However, developers have said time and again (and this is an old issue) that if the build-and-sell concept was to be implemented, the so-called extra costs would be passed on to the purchasers and it would result in higher house prices. Many developers may have to ''close shop'' as they would not be able to produce the required number of units to remain viable.

It has also been pointed out that many countries that are said to have adopted the build-and-sell concept are also selling first and building later for other developments that require many units to be built. The contention is that the build-and-sell concept is feasible only with limited units and is difficult to apply for mass housing.

Whatever it is, I like to make a few observations:

·The PM's remark/suggestion has (like it or not) awakened members of the public to the possibility of the Government adopting the concept or at least a form of it, and this, of course, is good news to house buyers. It enforces the consumers' belief that they deserve better and they will seek it out. It also spurs industry players to be more competitive.

·It would be a matter of time when the build- and-sell concept takes root. How? Nobody believes that metal can fly at the turn of the last century. Just as today's big jumbo jets criss-cross continents, so will mass manufacture of housing parts.

I recall visiting a trade exposition during a holiday in Japan in 1979. I was very impressed with a modern prefabricated house built by a Japanese company. The interior as well as exterior are so nice and came complete with planter boxes, small gate and even a letterbox.

I do not know what happened to that house, whether it has been successfully adopted for mass housing or not, but those who have visited Japan and stayed in their hotels will probably agree with me that their bathrooms are ready-built and just fixed into the hotel room. They do not use ceramic tiles, mosaics or wood but a kind of hard plastic (or is it metal?) material for the bathroom that is easy to clean and maintain. Most things are compactly and efficiently designed.

·Many developers are adopting the build-and-sell concept, especially after the 1997 regional financial crisis. The last recession, in a way, is a blessing in disguise as it was a learning experience for property developers. Many of them took time to review their strategies during the lull period.

Instead of doing nothing, they built better houses first, partly to test the market. When people like what they see and have confidence in the developer, they start to buy again. The success of these developers who were able to close sales because they have houses to show, spurred others to follow. I think most house buyers would not mind paying a bit more for a property that has been satisfactorily built before they buy.

Many nice houses in Seri Damai, Kajang, have been completed although some of the units are still unsold. Visitors can see the good quality finishes. It is the same with The Serenity link houses in Cyberjaya where they were launched only after completion.

·There could be legal and other complications if buyers (as suggested by the National House Buyers Association) need only pay 10% of the housing cost as a deposit of the project. I am not sure whether they mean the cost of the house or the purchase price (they are not the same) but judging from past experience, many Malaysians do not seem to mind foregoing the 10% when things go wrong.

''This may backfire because if for some reason many of the buyers forego their 10% when the development hit a snag, the developer may not be able to continue with the project unless he has made 60% sales,'' said one developer.