10:90 isn't a Build-Then-Sell system
NST 12/08/2006 Published in NST-PROP A Buyer Watch Article by National House Buyers Association

It's actually an interim solution to protect buyers

Since the Government introduced the 10:90 concept for housing delivery, there have been mountains of news referring to it as Build-Then-Sell (BTS) system. But they've all got it wrong.

Maybe it's because Malaysians are so used to the current method of developers selling, then building houses that any deviation such as 10:90 appears like the total opposite. Maybe it's because we are all desperate for a solution that can put an end to the problems caused by the Sell-Then-Build (BTS) that we hope the 10:90 can be a type of BTS. Whatever the case, it's time to clear up any misunderstanding or confusion.

As a quick recap, with BTS, developers can only sell their houses after they have been completed. Because of this, developers adopting the method need not apply for the requisite Developer Licence or Advertising and Sales Permit in order to sell their units, and also don't need to adhere to the standard Sale and Purchase Agreements as spelt out in the Housing Development Act.

In this sense, the 10:90 concept announced by the Government is not a true BTS system - it is actually a model that sits midway between the present STB method involving the progressive payments and the complete BTS system.

As such, it can be described as a variant of either STB or BTS, or even a "Deferred Payment" method. It matters little. To portray it accurately, we prefer to term it the "10:90 concept".

What is important is to understand the mechanics.  As the interim solution that can remove a large amount of risk from buyers so they won't end up either being stuck in an abandoned project or owning a shoddily built unit, the 10:90 concept allows buyers to pay a 10 per cent deposit to lock-in their purchase.

The remaining 90 per cent of the purchase price is only payable upon completion of their houses together with the issuance of Certificates of Fitness for Occupation.

Until that time, the 10 per cent paid is held by a lawyer acting as a stakeholder.

Since with the 10:90 concept houses wouldn't have been completed yet, (unlike BTS), buyers would not be able to physically inspect their units before signing on the dotted line and purchase would still be based on developer's brochures and advertisements, as is currently practised.

However, its big difference with STB is that should the developer for whatever reason abandon the project, its buyers would be insulated from the disastrous fallout.

Obviously, with the introduction of the 10:90 concept, a new standard Sale and Purchase Agreement is required. In this respect, the Legal Committee of the National House Buyers Association has proactively crafted what it should look like, together with two new schedules of payment for landed and stratified properties.

We have already forwarded the proposed agreement to Ministry of Housing and Local Government secretary-general Datuk Ahmad Fuad, and will discuss our proposal next week.