Wednesday, September 28, 2005

Build-Then-sell not viable Option

Housing Developers were caught by surprise
recently when the Housing and Local government
Ministry through its Minister , Datuk Ong Ka Ting,
announced that it was finalising a proposal for the
build-and-sell (BTS) concept to be adopted by the
Housing Ministry.Such a concept if adopted would have
serious repercussions on the building industry.The
nonchalant manner in which the proposal was to be
hastily tabled for a cabinet decision does not augur
well for the housing industry.
I cannot recall any discussion or debate being
held by the Housing Ministry with the Housing
Developers on the build-and -sell concept.The speed
and haste for the implementation (if indeed it is
implemented) of such a concept will certaintly spell
the end for medium and lower housing developers
From the onset I would categorically say that
the build-and-sell concept based on the Australian
model of 10/90 would be a failure if not a disaster if
introduced in the Malaysian building industry.The
10/90 system based on the Australian model is
regulated under S9AA of the Sale of Land Act 1962 of
the State of Victoria.Such a model from its appearance
would favour the house buyers but not necesssary
providing any advantage in terms of the cost of the
house.From the perspective of the Developer this model
would only further compound its problem
nothwithstanding the fact that it still have to comply
with existing housing laws and state governments
policies on Bumiputra ownership, mandatory laws on low
cost housing and infrastuctural requirements enforced
by local councils.In short, such a concept would not
be a workable model in the context of the Malaysian
environment where procedural and government policies
differ extensively with the Australian model.
The 10/90 variant model as practice in Australia
is successful because of the absence of bureacracy and
the efficient mechanism in place for submission and
approval for building plans.The normal time required
for such approval is about 3-6 months in Australia as
compared to 2-3 years over here in malaysia.In
addition, conditions such as mandatory 30% low cost
and bumiputra allocation housing all play a
significant part in adding cost to the total
expenditure of the developer.It must be noted that all
these extraneous conditions are absent in the
Australian model and this ensure a smooth
implementation of the 10/90 model.
Let us examine the 10/90 concept in more
detail in order to expose the frailities of such a
model.Under the 10/90 model, purchasers pay a
downpayment of 10% of the contract price upon signing
of the sale and purchase agreement and the deposit is
placed in an escrow trust account(lawyers as
stakeholder).The remaining 90% of the purchase price
becomes payable only on delivery of vacant possession
of the completed house.Obviously the house buyer has
zero risk and the bulk if not the total risk factor
is borne by the developer.From the very beginning the
developer would have to use its own or borrowed funds
to finance the project.They do not even have the
luxury of using the buyer's 10% deposit since it is
escrowed in an account until the handover of the
houses.From the time of submission of the property for
approval until the completion of the houses, the
gestation period is almost 5 years.(assuming building
take 2 years).Is it practical and fair for the
developer to bear the risk for 5 years before seeing a
return on its initial investment?And what would happen
if during the interim period there is a downturn in
the property market and the buyer decides to cancel
its obligation to buy the house?The buyer may choose
to forfeit its 10% deposit but the developer would now
be left without the 90%purchase price.It is little
comfort that the legal remedy for specific performance
is available but how many developer can afford the
lengthy litigation to recover the money.?
In short the likely scenario would be abandon
projects and bankrupt housing developers who are left
in the lurch by house buyers in the event of a
property crash.
The Housing Ministry must first ask itself
the question whether it can dismantle the onerous
government and state policies of low cost housing and
mandatory bumiputra allocation. Whether it can promote
an efficient mechanism to reduce bureacracy in the
submission and approval of building plans.If the
answer is no, then the 10/90 model is not a workable
option for our building industry.If there is an
attempt to introduce the Australian 10/90 model it is
imperative that all other conditions must be in place
before we seek to introduce the model in toto.

Friday, September 23, 2005

Anwar Lost his opportunity to lead.

I totally disagree with Ah Chong's article
that 'Anwar very much a leader after six years'.With
due respect to Anwar, he had his chance to show his
qualities of leadership to lead our multi-racial
country into the next millenium, but he failed
Let us not forget that when he was Education
Minister, his race based and communal policies did not
endear him to the chinese community. Mara
matriculation schools did not even allocate the 10%
places for non-malays when it was first promised but
later through Dr.Mahathir's direction that the 10%was
grudgingly given.
Even when he was Deputy Prime Minister, he was
not a popular figure amongst the other communities
because of his frequent malay agenda.During his brief
tenure as Deputy P.M he did not display any qualities
of justice and fairness to the other races. Now that
he is no longer in the corridors of power why should
we believe that he would change.
There is a tendency for politicians to try and
garner support merely for political mileage and
expediency so that it will appeal to a wider
audience.But given the earlier opportunities, he had
failed to introduce any of those measures which he now
deemed superflous.Sad to say, he had his chances and
he blew it. I dont't think our future and destiny lies
with his leadership.The sea of faces in our political
spectrum also do not presently offer us with many
choices.The charismatic and strong leadership that we
yearn for is sadly lacking.There is no light at the
end of the tunnel.We just have to trudge into this
millenium aimlessly without any direction.

Tuesday, September 20, 2005

Bumiputra Discount On Houses should Be abolished.

When policies formulated and implemented
many years ago becomes no longer relevant in today's
society, the govt should take steps to abolish or
adjust it to suit the current circumstances.When the
policy of mandatory requirement that developers should
give a 5% to 10% discount for bumiputra house buyers
was introduced it was intended to increase house
ownership of bumiputras.This was especially directed
at ownership of houses in the lower and medium
However, today we see the policy extended to
cover and include high end, sophisticated
condominiums, apartments and bungalows.If bumiputras
can afford to buy such expensive properties what then
is the rationale for giving them a discount when
inevitably the cost would be borne by non-bumi buyers.
Instead, the govt should put a ceiling of
house prices which would qualify for a discount.For
example, all houses below $100,000 should be given a
5% or 10% discount for bumiputras.This way the benefit
of lower priced houses would be given to those who are
in need of help and not those who are rich and not
On many occassion local authorities have been
guilty of delaying the release of bumiputra unsold
units when it was quite apparent that bumiputras were
not interested in the property.This has undoubtedly
caused alot of hardships to developers and has
contributed to alot of abandon projects.This is
especially true with DBKL where developers after
having satisfied the condition of advertising in the
papers for sale of Bumi units were further told to
hold road show at Mid-valley .The whole exercise was
really a futile one because most of the properties
were located in predominantly chinese areas and no
amount of publicity could persuade bumiputras to buy
the unsold units.
If the govt is so insistent on selling those
units to bumiputras then perhaps the option is to set
up an agency to purchase all units allocated to bumis
and gradually sell at a price they feel would be fair.
That way housing developers would not be caught with
the holding cost which undoubtedly would be pass on to
the consumers.

Tuesday, September 06, 2005

Gerakan Election Is Rigged.

The Gerakan presidential election tomorrow
is a foregone conclusion.Dr. Lim keng Yaik will win
and will win handsomely.He will win not because he
deserves it or he commands the support of the Gerakan
members but because the election is rigged.I know it
for a fact because only recently I found out I was a
Gerakan member for the last 10 years in Kelantan.
Some 10 years ago I was invited to
participate in a Gerakan organised Golf tournament and
in order to qualify to play I was told that every
player had to sign a Gerakan membership form.I was
under the impression that the membership was
specifically for that occassion.Ten years down the
road I discovered recently that I was still a member
despite the fact that I had not attended any of its
meeting and had not paid for my annual membership
Somewhere, someone in Kelantan has been paying for my
annual subscription fees and have been using my name
to cast all Gerakan held election.I was not the only
person who was roped in to be Gerakan member. At least
more than a 100 of unsuspecting golfers were enlisted
to be Gerakan members and to this day I believe their
names like mine still remain in the Gerakan electoral
My name and 100's of phantom Gerakan members
would be used for tomorrow's election to decide the
fate of the presidential candidate.Kerk Choo Ting does
not stand a chance to win tomorrow's election and I am
quite certain his staunch supporter, Dr Tan Kee Kwong will also meet the same fate.