39. Build-then-Sell: A flop?

by Giam Say Khoon, theSun 

Housing and Local Government Minister Datuk Seri Ong Ka Chuan says the build-then-sell (BTS) housing concept is already on trial with some developers voluntarily adopting it.

"No, the BTS has not been deferred," he told reporters in a developer's private event today when commenting on a report in a national English daily (not theSun) that the BTS had been deferred.

Ong said the BTS, requiring housebuyers to pay only 10% price of the sales price of a house, was only put on trial last year because there were many "financial and legal implications".

"Finance institutions are reluctant to shoulder the risk of BTS because some buyers do not honour the Sale and Purchase Agreement (S&P) after the houses are completed. Developers are then placed in a stressful position.

"So, we have suggested that the BTS be run parallel with the existing system (the sell-then-build concept) and we want to see what kind of technical problems arise.

Ong said developers are allowed to choose whether to implement the BTS or the conventional progress payment sales concept. "But those who opt for BTS are entitled to the waiver of the RM200,000 deposit for a housing development licence.

"We are still compiling feedback from the legal profession, developers and financial institutions to decide whether to make it mandatory for all developers to adopt the BTS. We are refraining from drastic action for fear of killing the construction industry," he added.

Asked how many developers had voluntarily participated in the BTS concept, he said: "Very few."

"For example, I received feedback from the Bandar Utama developer that it preferred to complete building the houses before opening them up for sale. That's because some buyers may be just speculators who will not honour the S&P if the value of the property depreciated.

"(In such a situation) the developers will be tied down by the S&P," he said.

On abandoned housing projects, Ong said three million houses were built in the past 28 years nationwide. "Unfortunately, 30,000 houses were abandoned."

"So, we are trying to encourage the industry to continue to prosper, hoping for good developers to revive and complete the abandoned projects as 'white knights'. We also understand that developers are facing uncertainty due to fluctuating oil and building material prices."

If you can build a RM 200,000 car and still sell it, I fail to see why you can't do the same for a house - the Editor.