Purchasers push for build-and-sell system

22/06/2003 NSUNT-FOCUS

BUYING a house can sometimes be a bad investment, especially in the following circumstances: when the project is abandoned, when your house turns out to be a lopsided building filled with cracks, and when your house is in the middle of no-where - not 20 minutes from Kuala Lumpur as promised by the developer.

One way to ensure that buying a house is not as risky as investing in the stock market is to ensure that the house is ready when it is purchased.

The National House Buyers Association has been advocating the build-and-sell concept for quite sometime now.

With this concept, the buyers can examine the products to their satisfaction before parting with their savings - instead of risking everything based on glossy brochures and artist's impressions.

The current mode of sell and build sees the purchaser being burdened with the developer's financing cost, via the progressive payments the purchaser's bank makes to the developer.

And the purchasers would have to continue paying his loan even if the project is abandoned.

In such cases, he would not even be able to stake claim to the land upon which the house was supposed to be built, says the HBA.

This is because the land may still be under a master title which is yet to be sub-divided. Furthermore, the land would be charged to the developer's own financier - who would have a priority claim as secured creditor.

The HBA on numerous occasions has urged the Government to follow the Australian system where the housebuyer need only fork out 10 per cent upon signing the sale and purchase agreement.

The purchaser pays nothing else until the house is ready for occupation and then he is given three months to arrange financing.

Real Estate and Housing Developers' Association (Rehda) president Datuk Jeffrey Ng believes that the build-and-sell concept proposed by HBA will not be feasible for now. Under the Eighth Malaysia Plan, more than 600,000 houses are to be built in five years.

"There is no way we can build that many houses in five years with the build-and-sell concept," says Ng.

If that is the way the industry works, only large developers with huge cash reserves can undertake the build-and-sell projects.

"And since they are self-financing these projects, these developers will scale down the size of their developments and concentrate in the urban areas," argues Ng.
 

The smaller developers will have to move out of the industry. "In such a scenario, how are we going to satisfy the demand for housing and build 600,000 units within five years?" he asks.

Ng says Rehda is not objecting to the build-and-sell concept, only that the timing is not right.

"We have to wait till both the industry and the market matures."