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What is the Build then Sell 10:90 (BTS 10:90) concept and how can it help the housing industry?


There has been some confusion over the Build then Sell system in the news recently – According to Housing & Local Government (KPKT) Minister Datuk Seri Reezal Merican Naina, only 4 property developers in Malaysia are able to carry out the BTS concept. HBA seeks to provide some clarification over the issue and urges developers to start incorporating BTS 10:90 as it can help solve present-day ailments afflicting the housing industry.

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What is the Build then Sell 10:90 concept?

HBA would like to point out that there seems to be some confusion about the Build-Then-Sell (BTS) version and its variant, the Build-Then-Sell 10:90 (BTS 10:90). There are marked differences between the two.

Currently, most property developments in Malaysia incorporate the Sell-Then-Build (STB) system, where house buyers pay 10% and continue to pay the progressive payments for their unit as the developers build. In the absolute BTS system, developers can only sell finished products that are ready for buyers to take over to occupy.

Meanwhile, under the BTS 10:90, developers can sell only once approvals have been obtained and upon launching the property. Under the BTS 10:90 system, house buyers only need to fork out the initial downpayment of 10% when signing the Sales and Purchase Agreement (SPA) and they do not need to make any further payment until the vacant possession of the property is delivered to them. The balance of 90% is payable only when the houses are completed with separate land titles, Certificate of Compliance and Completion (CCC), water and electricity connected and keys to the house handed over. As such, the servicing of the end-financing loans do not kick in until the houses are completed with all the certifications obtained.

Essentially, the BTS 10:90 is a hybrid between the present progressive payment (STB) and the complete BTS. You may either call it a variant of the STB or the BTS, or even a ‘Deferred Payment’ basis; it matters little. We would prefer to term it BTS 10:90 so that it portrays a more accurate picture of what the system entails. It is also important that all parties understand the mechanics of it.

MORE: What happens when a property development get abandoned and changes ownership?

Government was supposed to make BTS mandatory for developers by 2015

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Under the absolute BTS aka 0:100 concept, the wealthy property developers (which we reckon the Minister was referring to the 4 developers) will be in better positions whereas developers who are financially weaker will face difficulties in launching and selling their property developments successfully.

Now, the BTS 10:90 is more feasible and workable to a larger group of developers. In fact, in the 2014 book: Housing The Nation: Policies, Issues And Prospects, academician Professor Nor’Aini Yusof gave a balanced view and elucidation on the two systems. We believe that in her analysis she had presented more positive comments for the BTS 10:90 concept.

Below, we highlight several sentences from her concluding paragraph in Chapter 11, page 289:

Proponents of the BTS and STB have both been very vocal in expressing their arguments and views. The government, for whom both sides are important stakeholders, needs to weigh these views carefully. It has already expressed its commitment to making BTS mandatory by 2015.

“Incentives have been introduced by the government to facilitate the BTS approach, including fast-track planning approval process, waiver of deposit for the developer’s licence and an exemption for low-cost housing. But as Walczuch et al, (2007) has warned, and as past experience has shown, housing developers will undoubtedly be even more vocal and critical about BTS as we approach 2015. They will likely find excuses not to implement BTS, or at best, they will ask for more help in doing so.”

“The resistance to the BTS approach is certainly not helpful to the housing industry and the development of the country as a whole. Certainly, there are direct and indirect costs incurred as developers adjust to BTS but its adoption should be viewed positively as a means to further safeguard the interests of house buyers, and perhaps further enhance or restore their trust in developers. Closer cooperation and engagement will ultimately create a win-win situation for all stakeholders in the housing industry.”

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Why is the BTS 10:90 the way forward for the housing industry?

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A few public listed and financially strong developers with developments in prime locations have actually already adopted the BTS 10:90 concept by adopting the ‘Schedule I’ (Sale & Purchase Agreement for Land & Building) and ‘Schedule J’ (Sale & Purchase Agreement for Stratified Buildings). This goes to show that the BTS 10:90 is not a totally alien system.

Housing projects that are built and marketed using the BTS 10:90 concept need to use the statutory standard SPA whereupon the buyers pay 10% as deposit and only pay the balance 90% upon full completion by the developer. The 10% paid to the developer, is deposited in the Housing Development Project Account and the sale is ‘locked-in’. Just like buying a motor vehicle, there is no progressive payment due to the manufacturers. On completion, you deliver the product and collect the balance payment.

For the house buyers, it is still a purchase based on brochures and advertisements on a concept. The 10:90 concept is still a “Sell first then Build” model as homes are yet to be built or completed at the time of signing the SPA. However, the big difference is that if the developer for whatever reason fails to complete the project or abandons the project, the buyers are insulated from the developer’s business risk and possible disastrous fallout. This helps to safeguard the interest of house buyers and eliminate the hundreds of Abandoned Housing Projects which are still occurring in Malaysia.

To better understand the various existing sale transactions and payment systems for the different types of property purchases; the same are enumerated from this table:

Comparison between BTS, STB and BTS 10:90

No ItemsCompleted Properties     (BTS aka 0:100)  Progressive Payment System (Sell-Then-Built)BTS 10:90 Payment Concept
1.On the signing of the Sales and Purchase Agreement (SPA)Pay 10% of Purchase PricePay 10% of Purchase PricePay 10% of Purchase Price
2.Waiting period for Completion of Construction & Notice of Delivery of Vacant PossessionNoneWithin 24 or 36 months or more upon Architect’s Certification of CompletionWithin 24 or 36 months or more upon Architect’s Certification of Completion
3.Buyer to complete payment/s3 months from SPA Date (in normal situations)Progressive payment system (10; 10; 15; 10; 10; 10; 5; 2.5; 2.5; 17.5; 2.5; 5 in % (from first 10% payment or SPA Date) while waiting for completion of construction90% of Purchase Price at 24 or 36 months from SPA Date depending on the regulated contract of sale
4.Waiting period for actual occupation with Certificate of Completion & Compliance (CCC)NoneWithin 30 days from Vacant Possession with accompanying Developers’ architect issuance of the CCC.Vacant Possession with CCC, with water & electricity connected and ownership (title deed) papers
5.Waiting period for transfer of individual/strata titlesVaries on whether titles have been issued at the time of signing of SPAVaries from developer to developerVacant Possession with the issuance of land titles

As can be seen from the table above, the 10:90 payment system is still a contract to sell (through the signing of the SPA), and the property is built first, then delivered. The term ‘Built-then-Sell’ (BTS) is hence not appropriate and should not be used in its entirety when referring to the BTS 10:90 concept as the two systems encompass substantially different characteristics. To avoid further misconceptions, we should all refer to this model as BTS 10:90 concept rather than confusing it as an absolute BTS concept.

The BTS 10:90 is a far safer mode of delivering homes to Malaysians and the Government should compel property developers to adopt this system as we believe it will drastically if not totally eliminate cases of housing projects being abandoned. Do refer to this article to do a quick background check on property developers in Malaysia before committing to a house purchase: Blacklisted property developers in Malaysia.

This article is written by Datuk Chang Kim Loong, Hon. Sec-Gen of the National House Buyers Association (HBA), a non-political, not-for-profit Organisation manned wholly by volunteers.

Disclaimer: The information is provided for general information only. Malaysia Sdn Bhd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.

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