It all has to do with the system of selling and buying houses that was put in place by the government through the Housing Development Act. The act dictates that the buying and selling of houses are to be based on the sell-then build (STB) system. Basically, it enables developers to sell their products and start collecting payments as soon as buyers sign on the dotted lines – that is even before the houses are built! It can be equated to buying and progressively paying for a dream or ‘a pie in the sky’.

All is well if the dream materialises, but what if for whatever reasons the developers fail to complete the houses that they have sold and for which they have already collected partial payments? The affected buyers will be left with devastating financial and legal nightmares. Doesn’t this scenario indicate that it is blatantly obvious that the system is seriously flawed?

This brings us to the next question: Why does the government have to spend so much of the rakyat’s money to bail out (semantically camouflaged as ‘revival of’) these failed projects? The projects are failed businesses and why should the government aid them?

The reason is obvious. It is because the innocent and naive house-buying rakyat (voters) are suffering.

Now this raises another question which is why are house buyers involved and dragged into business failures? Hypothetically speaking, if our national car maker, Proton, is to fail (we categorically stress that we are not suggesting that it ever will), not a single Proton buyer will be affected. The answer is actually very simple - it boils down to the payment system.

House buyers are made to progressively pay the developers when they are building the houses. In other words, developers are using their customers’ funds for their capital requirements. Thus, if their business were to fail or run into cash flow problems, the houses cannot be completed and the house buyers are left in a lurch. This is the very reason as to why the government has to channel vast amount of taxpayers money to bail out (revive) these abandoned housing projects that are causing untold hardship to those who are unfortunate enough to be involved. It is a situation of, ‘profits privatised, losses nationalised!’

The reported 45,449 units of abandoned houses are a lot of houses and the RM3 to RM5 billion required to bail them out is a lot of taxpayer’s money! There must be a considerable number of buyers together with their dependants who are suffering along with them. Time forbids us from researching into the number of schools and hospitals that such amount of money can build for the rakyat.

The figures mentioned only represent Selangor and they do not include commercial properties. Add in the other states together with all other projects that are classified under ‘commercial’ and we believe that the situation would have reached pandemic level as the actual amount required to ‘revive’ all these projects is certainly much, much higher than the reported RM3 to RM5 billion required in Selangor.

Even if the government can afford and is willing to spend such a horrendous amount of money to bail out these failed projects, what happens after that? Are we to make big annual budget allocations to deal with abandoned housing projects? Like any other businesses, nobody can guarantee the success or failure of any venture. Our message is that when the current ones are revived, more will sprout and the situation will continue to prevail!

How do we put an end to this problem? Actually, the answer is quite simple as the mechanism is already in place. The build-then-sell (BTS) variant called the 10-90 system (pay 10% upon signing and then the balance 90% upon house hand over) was already put in place during the last amendment to the Housing Development Act two years ago. The big problem is that the 10-90 system was not made mandatory but was left as an option for developers. The badly flawed and devastating sell-then-build system is very much alive and kicking, to the demise of unfortunate buyers. It is not difficult to understand why few, if any, developers actually opted for the build-then-sell system. Why should anyone voluntarily opt out from a position of extreme advantage?

If the government is serious about not having to continually spend vast amount of taxpayer’s money to bail out failed housing projects, then the 10-90 system is the most practical system to adopt. This system omits the house buyers from the risk equation, leaving developers and banks to deal with the success or failure of their business ventures. Banks will have to conduct more stringent viability studies to ensure that only projects that are feasible are financed and bogus developers are ruled out. The system will be more self-regulating and the Ministry of Housing does not need to spend so much resource to police/monitor and to enforce the Act to protect house buyers. Looking at the current situation, it is obvious that such policing and enforcements have failed. Under the 10-90 system, revival of failed projects will be much more viable and speedier.

Clearly the badly flawed sell-then-build progressive payment system has outlived its usefulness and is now creating untold hardship on unfortunate house buyers. It is high time that it be phased out so that the flood gate leading to the present appalling situation is closed whilst revival efforts on the current stalled projects are being pursued.

Is this not the rightful way to go?

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