Badly Flawed Argument by Minister (of Housing)
The Minister of Housing and Local Government, YB Dato Seri Kong Cho Ha was recently reported to have stated, “1345 developers and more than 5000 directors of such companies involved in problematic projects have been blacklisted.”
The Minister further stated that many developers were fined for not conforming to the Housing Development Act. Our questions are:
- How many cases are there where such fines were imposed?
- What good is it to those hundreds of thousands of innocent house buyers who have paid a lot of money and who have not been delivered their dream houses due to project abandonment? Would it alleviate their problem with their Banks? and
- Has prosecution of every one of those errant developers, where their projects have been abandoned, been initiated?
The Minister also stated that there are 135 abandoned projects in the country and thinks that the number is not high. It is because the figure is down played and is not reflective of the prevailing conditions. Perhaps, it is done to achieve their Key Performing Index (KPI). What about those presently ‘problematic’? How many of these 1345 problematic projects are likely to ‘mature’ into abandonment? How many buyers are involved? The figures will obviously haunt and shock us all.
EMPOWERING BUYERS WITH INFORMATION
Recent revelations has shown that despite the stringent Housing Development Act, the industry is still flushed with 1345 rogue developers (as compared to 695 rogue ones, some four years ago) posing serious threats to naïve and unwary house buyers. This figure is of quite a magnitude in relation to the number of developers. Hence, there is a crucial need for an avenue where potential house buyers can check on developers before they embark on any purchase. The HBA has suggested that the Ministry’s elaborate website seems to be the best avenue to post such information of those errant developers that have defied the Awards of the Housing Tribunal; those taken to task and under the process of prosecution; those having breached the housing act and its regulations and the worst of which those who leave behind a trial of abandoned housing projects. However, differing views on the legality aspect prevented so. The other issues also entail the extent of publication that should be made available to the public at large. The compilation of a database will keep the public informed about rogue developers taken to task by the Ministry and the house buyers will be able to stay clear of such errant developers with defaulting records. HBA is pleased to highlight that the lists of those rogue ones are now available in the Ministry of Housing website: http://www.kpkt.gov.my/kpkt/main.php?Content=sections&SectionID=146 with the following details:-
Senarai pemaju yang disenarai hitam mengikut kategori:
- Senarai Pemaju Yang Masih Ingkar Award Tribunal Tuntutan Pembeli Rumah (TTPR) Sehingga 11 Februari 2010
- Senarai Syarikat Memajukan Perumahan / Menjual Rumah Tanpa Lesen Yang Telah Didakwa Di Mahkamah Selaras Dengan Seksyen 5(1) & (2) Akta Pemajuan Perumahan (Kawalan Dan Pelesenan) 1966 Bagi Tempoh 2003 Hingga 14 September 2009
- Senarai Pemaju Yang Didakwa Atas Kesalahan-Kesalahan Lain Di Bawah Akta Pemajuan Perumahan (Kawalan Dan Pelesenan) 1966 Dan Peraturan-Peraturan Berkaitan Bagi Tempoh 2003 Hingga 14 September 2009
- Senarai Pemaju yang gagal membayar kompaun bagi kesalahan di bawah Akta Pemajuan Perumahan (Kawalan & Pelesenan) 1966 (Akta 118) & Peraturan-peraturan dari Tahun 2003 sehingga 12 Februari 2010
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- Kutipan kompaun sehingga 31 Januari 2010
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- Maklumat sedang dikemaskini
- Maklumat berkaitan Projek Perumahan Terbengkalai sehingga 31 Disember 2009:
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- 15 Projek dikeluarkan dari Senarai Terbengkalai
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- 47 Projek sedang dipulihkan Pemaju Asal / Penyelamat / SPNB
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- 86 Projek Perumahan Terbengkalai di dalam Rancangan Pemulihan
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- Status kes bagi pendakwaan dari tahun 2000 sehingga 31 Disember 2009
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BTS 10:90 CONCEPT
There is a hybrid system called the Build-Then-Sell 10-90 (BTS 10-90) system. In the BTS 10-90, buyers pay 10 per cent upon signing the Sales and Purchase Agreements. The balance 90 per cent is payable when the houses are completed. United Kingdom, Singapore, New Zealand, Australia and even Thailand have successfully adopted various variations of this mode. The common criteria being developers are not paid before they deliver their houses. This is the system that the government is encouraging and of which developers are reluctant to adopt. This shows that mere encouragement is simply not enough. Developers would naturally insist on continuing with the present Sell-Then-Build (Progressive payment method) to stay in the comfort zone. This is because house buyers’ funds (mainly through their housing loans) are being utilized for the construction. House buyers also carry the business risks which they should not. Business risks should be totally shouldered by business proprietors and not their customers. House buyers are merely customers.
MINISTER’S FLAWED ARGUMENT
The Minister seems to think that the big boys use their own funds to build houses and that only the small developers rely on bank loans to support their business. In reality, it is the banks that finance the building industry. Few developers big or small utilise their own in house funds to build houses to sell. This has to do with taxation, leveraging, etc. In the present scenario, the banks are lending to house buyers (through the housing loans) and these housing loans are used to pay developers as they build (ie, the progressive payments). There seems to be a muddle up between corporate financing and retail financing and this is the root cause of the problem. When a project (business) fails, everybody is in trouble, the worst being the customers (house buyers). The bridging financing banks are in trouble because the collaterals are fragmented when the liens are being progressively transferred to the end-financing banks after sales. The end-financing banks are in trouble because the abandoned houses have no cashable value when the buyers default in payment.
The premise that only big developers are cash-rich and can adopt the BTS 10-90 by the use their in house funds to build houses and that small developers must rely on banks to support their construction, is badly flawed. Both parties rely on bank financing for their businesses and the Association of Bankers have repeated stressed that banks do not simply look at the mode of delivery (either BTS or STB 10-90) but more on viability. Thus it is not true that if the BTS 10-90 is implemented, the property market will be limited to the big boys or that they will monopolise the business. Big boys can do big projects whilst small boys should do small projects or they can simply phase out their big projects. We conclude that the Minister is ill advised.
WHEN WILL THEY LEARN?
Our caring government of the day should adopt a time-line for the phasing out of the disorderly and hazardous Sell-Then-Build system and the adoption of the orderly Build-Then-Sell 10-90 system. Short of that, there will be no end to the problem of innocent house buyers being caught in situations of paying and not getting their houses. This abandoned housing projects issue will continue to haunt us all until and unless the government closes the floodgate by imposing BTS 10:90 mandatorily.
The National House Buyers Association (HBA) is a non-profit, non-governmental, non-political organisation manned by volunteers. For more information, check out its website at www.hba.org.my or email info@hba.org.my
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