SHOULDN’T buyers of affordable houses be given more protection? Do they have lawyers to advise them? And act for them in court against dishonest developers? Are they expected to spend a lot of money pursuing their interests and entitlement?
Even the reasonably well-off suffer because of the lopsided sale & purchase agreement (SPA) provided by the Housing Ministry and exploited by developers. HBA’s long campaign against the sell-then-build (STB) system should be vindicated in the case of buyers of affordable houses. The buyers of affordable houses are people of modest means, and deserve to be protected.
BTS 10:90 vs STB
The current STB system has caused abandonment and, worst, foreclosure of the purchaser’s property by the developer’s banks. The STB is the developer’s dream as it allows the developer to enjoy the instalment payments of the purchase price as he builds so that he really does not need to borrow, and if the developer has over-extended his commitments, he may borrow sums on the security of the purchaser’s beneficially-owned house, a sum much in excess of what he needs to build the purchaser’s house, and if he squanders it, or is tempted to cheat, even where the purchaser has paid the full purchase price, he can walk off with his pockets bulging with the purchaser’s money and the loans, and lets the developer’s bank to auction off the purchaser’s house. The developer has all to gain and nothing to lose.
And even when the house was built, there were other problems for purchasers:
> Unauthorised changes;
> Substitution of sub-standard materials;
> Shoddy workmanship and unsatisfactory rectification works;
> Unfair settlements taking full advantage of the increasingly straightened financial circumstances of the purchaser and worst still:
> Taking of physical possession of the property without water and electricity supply.
The purchase of affordable house must be made safer. The affordable house purchaser’s profile is such:
> He has lower income;
> Is recently married with young children;
> Has no other house;
> He certainly cannot afford to have the developer abandon his house; and foreclosed by the developer’s bank because of the developer’s failure to settle his loans even after he had paid the purchase price; and yet be saddled with a house purchase loan to be serviced and settled though he is never going to see his house.
The built-then-sell (BTS) 10:90 concept, hybrid between STB and absolute BTS (0:100), proposed by the National House Buyers Association (HBA) was legislated in the year 2007 under SPA – Schedule I (landed property) & J (stratified property). It involves a much safer scheme for the affordable house buyer as it requires that the buyer make only an initial payment of 10% of the agreed purchase price, and pay the balance (90%) of the purchase price only upon completion of construction with the relevant Certificate for Occupation/CCC; utilities supply connected, with the ownership papers and whereupon the transaction is complete against the developer and he is bound to transfer the house to the buyer at the previously agreed price unless the buyer decides otherwise where, for instance, he is not satisfied with the standard of workmanship, in which case he loses the initial payment of 10%.
The developer is expected to meet the entire cost of construction presumably by raising project loans from banks, of course, on the yet-to-be-built house. Unlike in the current STB mode, the developer does not get to use the instalments of the purchase price for construction. If, as old habits die hard, the developer abandons the construction, the purchase stands to lose only the 10% deposit which, strictly speaking, should be recoverable from the developer.
The benefits and advantages of BTS 10:90 system of house delivery has been more than adequately expounded by HBA. In fact, the pros and cons of the BTS 10:90 had been deliberated at the highest level of government, ie at the Chief Secretary to the Government, through the Special Task Force for the Revival of Abandoned Housing Projects. Presentations, workshops and mini-labs were conducted by all relevant players in the industry including academicians for the last 10 years. The shift to the BTS10:90 system had been unanimously concurred except for Rehda, the developer’s outfit. Rehda simply does not want to accept a level playing field for both house buyers and housing developers and has not ceased to oppose it. In lean times, one favourite counter argument was that the industry was already suffering and that the system should not be changed to further aggravate it. In the good times, the argument was that the boat should not be rocked since the industry was doing well and contributed substantially to the nation’s GDP. These arguments are based on the intentionally and cunningly concocted premise that the industry will shrink if or when the BTS 10:90 is implemented.
Having heard all the arguments on the pros and cons of the BTS 10:90, in February 2012, the then Housing and Local Government Minister Tan Sri Chor Chee Heong tabled in parliament that come year 2015, the housing industry would progress mandatorily to the BTS 10:90 system of purchase and delivery. This had been recorded in the parliament hansard on two occasions; next only to legislation. That would have put the housing industry on a more orderly footing and ensured that house buyers are better protected while in the process of buying their houses. SPA: Schedule I & J shall be the order of the day.
But alas, fast forward to 2014: the Housing Minister was changed. A new minister, Datuk Abdul Rahman Dahlan took over the helm, baulked and made a U-turn for reasons only known to himself and those under his charge. This has drawn flak from the house-buying public and consumer associations especially the victims of abandoned projects and victims of those unlicensed developers. The year 2015 has come and gone, and the promise remains.
Fast forward again to 2016: the housing industry, on the pretext of the global slowdown and due to intentional governmental cooling measures against unbridled price escalations, experienced price stabilisation and reduced rates of sales. A new Housing Minister was appointed.
HBA has proposed a gradual “phase-in” period to make BTS 10:90 a reality. We hope the current Housing Minister, Tan Sri Nor Omar will have the courage to make BTS 10:90 a reality; not just for the first-time buyers but at least under the affordable category. Hold true to the Government’s slogan: “Janji ditetapi”. Well, better late than never.
Blue Ocean Strategy
Several housing developers have initiated BTS 10:90 system and HBA appreciates it as its Blue Ocean Strategy – BTS 10:90 scheme
In the midst of such uncertainties, it is most encouraging to see several housing developers embarking on the BTS 10:90 scheme.
The most recent is a particular housing developer, a listed company and a government-linked company, entirely on their own volition adopting the BTS 10:90 in their niche market developments pricing above RM1mil.
The BTS 10:90 strategy has already tasted success in the form of overwhelming response.
The developer has made the scheme an integral part of its marketing for the immediate future in a big way. We are informed about 90% of its units from the first phase of a project were snapped up during the launch period earlier this month. What is even more encouraging and proved beyond doubt is that the BTS 10:90 is totally viable and beneficial to all. The units in this project were almost completely sold.
With 13 phases from various projects with a gross development value of RM3bil, being rolled out under the BTS 10:90 banner.
If, for whatever reason, a buyer wants to exit from the purchase, he loses 10% but the likelihood of buyers opting for an exit is minimal. In three years, the prices of these properties would have moved up.
The success of this developer is indeed encouraging; HBA wants BTS 10:90 to be the norm, not niche.
This leads to some questions that need to be addressed.
> Why is it that only the buyers in this particular mid-to-high end project get to enjoy the safety and advantages offered by the BTS 10:90?
> Why aren’t the buyers of lower end and affordable houses (in fact buyers of all categories of houses) accorded this advantage?
> Why is the Government stifling parliament’s injunction (since 2015) that the whole housing industry should progress to BTS10:90 so that every house buyer in this country gets to benefit from this fairer and safer mode of buying houses?
> Does the current minister have the courage to make BTS 10:90 a reality and to fulfil the aspiration of the Government and the rakyat?
There should be no abandoned, low-end affordable houses. It is imperative: the law must ensure that the purchaser gets what he has paid for or money back!
Chang Kim Loong is the secretary-general of the National House Buyers Association (HBA): www.hba.org.my, a non-profit, non-governmental organisation (NGO) manned by volunteers. He is also the NGO councillor at the Subang Jaya Municipality Council.