My reply to The Sun Dailys Off The Cuff column on the housing `Buy-then-Sell (BTS) concept, recently. WHAT FLIP FLOP ON THE BTS CONCEPT? 1. I refer to the latest `Off the Cuff’ column written by Datuk Azman Ujang, former Editor-in-Chief of Bernama, dated 31 October 2014. In the said article, he claimed that the previous Housing Minister, `…declared in Parliament the mandatory implementation of the build-then-sell (BTS) system by 2015’. 2. It should be noted that the Government has not made a U-turn or a Government policy flip-flop on the BTS issue. It has never announced in Parliament as alleged by Datuk Azman that the concept will be made mandatory beginning from 2015. What the former Minister, Tan Sri Chor Chee Heung, said if that the BTS concept will be made mandatory, it will only happen in 2015. Chor’s report can be found in excerpt of the Hansard on 15 December 2011, at page 19 and 20. 4. Research on the BTS concept shows that there are several driving forces as well as restraining forces inherent to its implementation. Developers who wish to embark on the BTS concept will need to have robust and strong financial background. This will be especially detrimental to small- and medium-scale developers who could not meet up with the requirement. It will result in shrinking the housing industry as a whole. 5. Making BTS 100% mandatory, too, will constrain the already tight supply of housing, leading to a rapid increase in house prices. Furthermore, it may also negatively impact the national economic growth as the housing industry is an important component of that growth. 6. A number of other professionals, including the Architects Association, have cautioned against making BTS mandatory as it will result in a steep rise in the house prices. The HBA - being an association that that seeks to protect house buyers - should study this issue carefully if it truly has the interest of house buyers at heart. There is no denying that house prices will rise. The question that remains is the rate of that increase. At this juncture - when house prices are already high - does the house-buying public want another increase in house prices even if it is just a 10% price increase? 7. Regarding the issue of abandoned housing, the Ministry has already put in place a number of measures to ensure that housing project abandonment is minimised. Among these measures are: • Increasing the deposit for housing license to 3% of the construction cost • Making abandonment a specific offence under the amended Housing Act. • Stricter and more regular monitoring of all housing construction projects 8. With these measures in place, new cases of housing projects being abandoned will be kept at the barest minimum. There are still cases of abandoned projects, but this is a legacy issue. Most of these are old cases but were declared abandoned after all efforts to continue the project by the original developer have failed. 9. The STB concept will still be allowed, but additional conditions may be imposed on developers. Thus, developers wishing to adopt the STB model will have to comply with these new conditions. I sincerely believe that this will further protect house buyers. 10. It should also be noted that if the Government decides to implement the BTS model, it cannot force developers only use the BTS 10:90 framework. Developers will still be free to use the full BTS model (or the 0:100 framework). 11. We have, on record, HBA’s support of the full BTS model saying that this is even better than the 10:90 framework as buyers will be free to inspect the house and decide whether or not to buy it. Even in a BTS 10:90 model, a project can be abandoned and the buyer can lose his 10% payment. With the BTS 0:100 framework, however, the buyer is absolutely safe and is sure of what he will get. 11. The BTS 10:90 concept will also result in higher house prices as the holding and interest costs for the duration of building (i.e. 24 or 36 months) will be passed on to the buyer. Supply will shrink because developers will have to come up with a greater portion of financing for the BTS projects. 12. Another point to note is that the BTS 10:90 model can also result in greater speculation. One will need only pay 10% and pay nothing else until the house is completed. Once completed - and if the price is right - he can sell it and pocket the profits. However, if the house price drops more than 10% (upon completion), the buyer can walk away leaving the developer and the bank to deal with the losses. The HBA has been a champion against speculation but has strangely remained silent on this issue. 13. Naturally, the Government will consider all aspects and consequences before making a decision as to whether or not to make the BTS model mandatory. In any case, house buyers can be rest assured that the Government will have their interest at heart when deciding. The BTS system is currently being implemented in parallel with the STB system (as decided by the Cabinet). Since 2005, a total of 19 developers have developed 52 housing projects using the BTS concept. 14. The Government is also encouraging GLCs and key government housing initiatives to pioneer the BTS concept. For example, the Government Servants’ 1Malaysia Housing Project (PPA1M) is being developed using the BTS concept. Thus, it is not true that the Government has abandoned the BTS concept. 15. The Government has and will continue to encourage and promote the BTS concept. However, by not making it mandatory from 2015 onwards, does not mean that it has abandoned the BTS concept. 16. Not limited to BTS concept, the government will continue to source for multiple solutions to solve this housing conundrum. Currently, we are looking into house guarantee scheme as practices in South Korea to further protect house buyers from unscrupulous developers. DATUK ABDUL RAHMAN DAHLAN MINISTER OF URBAN WELLBEING, HOUSING AND LOCAL GOVERNMENT
Posted on: Sat, 22 Nov 2014 04:04:26 +0000
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