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Highlight Build-then-sell still on? Empty Highlight Build-then-sell still on?

Post by Cals Wed 22 Jan 2014, 19:14

Highlight Build-then-sell still on?
Business & Markets 2014
Written by Charlotte Chong of theedgemalaysia.com   
Wednesday, 22 January 2014 08:53

KUALA LUMPUR: The full implementation of the build-then-sell (BTS) model in the property sector is still far from certain despite the government saying it will be carried out by 2015. 

In a dialogue session after a book launch by Cagamas Holdings Bhd yesterday, Ministry of Urban Well-being, Housing and Local Government director Gurdev Singh said the ministry is still in consultation with developers and other parties to look at the best way to implement the BTS model.

“Under BTS, developers would require extra financing for their projects. The banks would also have to change their financing models. So it’s not something easy,” Gurdev said, adding that house prices would also go up as a result of supply constraints. 

These are the reasons why the government has been cautious in making the scheme mandatory, he said.

Gurdev also said he could not assure the public that the model would be implemented successfully. “Whether or not we are going to launch it, I can’t tell,” he said during the dialogue session.

Datuk Seri Chor Chee Heung, who was then housing and local government minister, reiterated in March last year the 2015 target for the full implementation of the BTS model. Chor was succeeded by Datuk Abdul Rahman Dahlan, after MCA decided not to take up any ministerial posts after the May 5, 2013 general election.

Due to the issue of abandoned housing projects, the government in April 2007 heeded calls for the BTS model to be implemented to strengthen protection for house buyers. 

Under the proposed model, buyers would make a 10% down payment and pay or draw down the loan for the remaining 90% value when the property is ready. This compares with the current practice where buyers pay or draw down loans for each stage of the construction until completion.

The implementation of the BTS model, if made mandatory, will shift the majority of the risk to the developers, as buyers would just lose the 10% down payment if the project is abandoned. The developers will have to bear the financing cost while constructing the project, but it is likely that they will factor in the extra financing cost into the price of the properties.

Despite supporting the BTS concept, Real Estate and Housing Developers’ Association (Rehda) president Michael Yam pointed out that with only a 10% deposit from the house buyers, the developers would have to find ways to finance the construction of the properties. 

One of the four panellists in the dialogue session, Syarikat Perumahan Negara Bhd (SPNB) managing director Datuk Kamarul Rashdan Salleh concurred that developers would face obstacles in financing the projects under the BTS model. “To what extent will the financial institutions be able to risk in funding the projects?” he asked. 

Some property players have also said that smaller developers would get out of the business due to their limited financial resources.

Meanwhile, National House Buyers Association (HBA) secretary-general Chang Kim Loong urged the authorities to make BTS mandatory by 2015, saying that: “We have been considering this for the last 10 years and [the scheme] should not be deferred any further.”

He added that the current model of sell then build should not co-exist with the BTS model as it would render the implementation of the latter meaningless.


This article first appeared in The Edge Financial Daily, on January 22, 2014.
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