I REFER to recent calls for the government to replace the proposed 5% deposit with a Home Completion Guarantee Scheme.

The subject of abandoned housing projects has been a bane for the house-buying public.

Hundreds of thousands of housebuyers and their families are left suffering in the wake of such abandoned projects where they have paid a lot of money and not obtained their houses. Most of them are compelled to continue servicing their housing loans that their banks had disbursed to the developers while they continue to live in rented houses.

The government had spent huge sums of taxpayers’ money to revive some of these failed projects (But more soon come on line). Some of these abandoned projects are the results of fraud and deceit. How else can we explain that in many of the cases the land and the houses (although uncompleted) become net liabilities to the extent that the cost of reviving them requires large amount of money. Even “white knights” are reluctant to go near most of these failed projects. In property development, any construction put onto a piece of land will progressively enhance its value. Full value is attained when the houses are completed. Thus the fact that a large number of these abandoned projects become financially not viable for revival only indicates that their developers have been paid more than what the construction stage entitles them to and/or that the money collected from buyers are channelled elsewhere instead of towards the completion of the projects. In both these cases, fraud is involved and in any case the buyers are the ones who suffer most although the banks involved are also put in a quandary.

Recently the Real Estate Housing Developers’ Association (Rehda) has proposed the setting up of a home completion guarantee scheme (insurance). In this scheme, participating developers are required to contribute 0.25% of their construction costs (not project value) so that their buyers can be assured of getting their houses. Rehda even suggested that taxpayers’ money be used to augment this insurance scheme. We have elucidated on the practicality of this proposed scheme.

In 2006, the then Deputy Prime Minister Datuk Seri Najib Razak announced that the build-then-sell 10-90 scheme would be put on trial for two years. Also announced were a host of incentives to encourage developers to adopt this system that basically insulates buyers from the hazards of abandoned projects (plus a host of other advantages, little highlighted in the media).

But the system was left to the option of developers with the present hazardous sell-then-build (STB) still very much alive and creating havoc. For obvious reasons developers are adamant about sticking to the STB despite the attractive incentives. It is high time that a firm timeline be established for the industry to progress to the BTS 10-90.

Rehda has repeatedly stressed that the choice of either STB or BTS (10-90) should not be compelled but to be “market driven”. We would like to point out that this present option of either STB or BTS (10-90) definitely cannot be termed as “market-driven” but more “developer-driven”. It is solely the developers who make the choice, not housebuyers or any other party, for that matter.

Is it surprising then that there had been few, if any, who voluntarily chose the BTS (10-90). The reasons are obvious.

Rehda went further to state that after a three-year trial period, the system has proved to be not workable. We would like to state that the BTS (10-90) has never be given the chance to see daylight because it was given as an option. Thus the system in effect, was never put to test against the prediction of doom and all the other frighteners put forward by interested parties in defending their turf. Thus unless the government put in a time-line for the industry to adopt the system to get rid of the problems, the following will prevail: