Developers believe that building and then selling housing units will one day become a norm in Malaysia - but not until several key factors that can affect sustainable economic growth and the national objective of home ownership are ironed out.

“Our economy and state of development are not at a level of maturity that can allow build-then-sell to be implemented immediately,” Real Estate and Housing Developers’ Association (Rehda) president Datuk Jeffrey Ng Tiong Lip said.

“Malaysia needs between 100,000 and 150,000 units of new houses each year. Adopting the build-then-sell concept will result in a significant reduction in housing production and market players, and this could lead to potential severe social and economic implications,” he added.

Another immediate impact would be financing. Developers would have to
seek project loans instead of bridging finance and Ng said it was unlikely financial institutions would lend if they could not gauge the viability of projects.

“Even under the present sell-then-build system where developers can demonstrate viability based on sales, banks have been known to be reluctant to lend when conditions are not risk-proof.”

Ng was referring to recent news reports by various parties calling for the build-then-sell concept of housing development for Malaysia, as is practised in countries such as Taiwan and Singapore.

Prime Minister and Finance Minister Datuk Seri Abdullah Ahmad Badawi also took up the issue, saying that the Government wanted developers to have funds in hand before embarking on housing projects.

Abdullah said his primary worry was about people who had paid for their houses but later found their projects abandoned, which was why he wanted developers to have adequate funds and “not sell first to get the money to build”.

The move for build-then-sell instead of what is currently practised - people buying houses based on artists’ impressions and layout plans - has been debated over the past two decades, and was even discussed in Parliament, but it never took off.

“While build-then-sell has its merits in addressing the problems in the housing industry, there are important national issues to be considered first, such as its implications on the economy, on business, on employment and the social consequences of any adverse effects,” said
Ng.

He suggested that the concept be further explored through discussions with all relevant parties, including the Finance and Housing and Local Government ministries, banks and some of the 140 industries that are directly or indirectly linked to the industry.

“Let us go through the complex issues and iron them out, and then we’ll be happy to adopt it. We’re not saying that build-then-sell will not work - it can if we do not require about 150,000 housing units a year,” he said.

As far as complaints from buyers are concerned, he said, the amended Housing Development Act provides a lot more protection and is also effective in tackling the weaknesses of the sell-then-build concept.

Rehda’s immediate past president Datuk Eddie Chen said the sell-then-build system continues to be widely practised even in Australia, the United Kingdom and the United States.

“Under their system, you have a situation where all the infrastructure is in place and the developer usually builds in small numbers, say 30 to 50 units.

“Here, we clear the land, lay roads, drains and piping, build electrical sub-stations and several hundred housing units, besides a school or two and community facilities. These things cost a lot and the sell-then-build method allows us the economies of scale to build phase by phase,” Chen said.