Building on quality
NST EDITORIAL  25/9/2005

RAPID development can whizz past important details — until, of course, things start to slow down. That has happened with the housing industry, where decelerating growth has brought into focus exactly how much of the fizzled-out building boom of the 1990s had been bought at the buyer’s expense (if not peril). As long as demand exceeded supply and property prices rose, buyers were willing to go up to their eyeballs in debt to purchase homes "blind", that is, before a single brick has been laid. It also happily suited the developers, contractors and banks to lump the project risk on the borrowers — suited them, according to the Real Estate and Housing Developers’ Association (Rehda), to the tune of 3.5 million units in the last 30 years. So why change an industry model that has worked so well for so long?

Because it hasn’t. Rehda’s numbers blur the potential for such a lop-sided buying-and-selling arrangement to go cruelly wrong. Last year, the number of abandoned housing projects stood at 227, worth RM7.3 billion, with most, if not all of it, given out as loans to 50,813 buyers. Many more waited years for their projects to be revived by Government intervention. Countless others have called themselves lucky just to be able to move in, structural and minor defects notwithstanding. As the sellers’ market deflates, long-trampled consumer rights have leapt out of the peeling woodwork.

Last year, the Prime Minister suggested that the entire industry be renovated from the ground up on the basis of building first and selling after. Conceding that too much uncertainty could bring housing construction to a halt, the Housebuyers Association earlier this month proposed a "10-90" formula in which the bulk of the payment for house purchases would only be made upon satisfactory completion of the properties.

Predictably, Rehda has cried foul. "Build then sell" would cause the industry to shrivel, increase prices and drastically cut supply. Only the biggest players will survive such a severe financial culling, it says, leaving the poorer parts of the country bereft of housing investment. The buffeted Housing and Local Government Ministry, recently accused of foot-dragging on behalf of the construction lobby, wants the industry to make a formal stand before submitting a memorandum to the Cabinet.

As far as its interests are concerned, Rehda is right — forcing down "build then sell" would upset the apple cart for the smaller housing developers. The larger ones, on the other hand, have begun to push the concept, compelled to do so by the only growing sub-sector in an otherwise shrinking industry. Like the problem of having too many Class F contractors dependent on Government contracts, there may be a costly downside to such a radical restructuring of the way the developers do business. But something has to give if the nation’s development is to be measured less by its pace than by its quality.