1.

Introduction

Malaysian housing industry has a big role to play for the country and society with
its direct impact can be seen thoroughly into the economic and social side if the housing
industry does not function properly. A lot of individuals see house as a major needs and
consider it as one of their biggest and most expensive investment of their lifetime. The
housing industry in Malaysia is not as bad as some other countries in the other part of the
world. At the very least, Malaysia is not a country who believe the housing industry is
something which should be going by the market force like the American. If the American
scenario will occur in Malaysia, it is for sure the housing industry in Malaysia would
definitely be facing numerous of problems especially in producing affordable and
sufficient house to the people of Malaysia. Housing has been highlighted its importance
in Malaysia when the government choose to intervene the market instead of letting the
market force alone control the housing production industry. Thus, it brings out the notion
of public sector involvement in the housing industry.

With the concern of the public in mind, this has shown that the Malaysian
government recognized the importance of housing as a basic human need. It is important
to notice that the government should play its role well in providing adequate, affordable
and sufficient housing to the public. Policies have been formulated in order to ensure the
above statement can be fulfilled and achieved by the government. This is in line with
Istanbul Declaration on Human Settlement and Habitat Agenda (1996) to ensure adequate
shelter for all. (Shuid, 2004) However, the government is not the side solely responsible
as for housing where the public and private sector, both has their own roles to comply
with. The public sector mostly deal with low cost housing and private sector will deal
with mostly medium cost and high cost houses development but with an agreement with
the government that the private sector must contribute 30 % of low cost housing as well
for every housing development projects.(Ghani & Lee.LM; 1997) All this is to
accommodate the 28.25 million populations in Malaysia. (Department of Statistic
Malaysia, 2010)

Through the Malaysian Seven Plan (1996-2000) and Malaysia Eight Plan (2001-
2005), the plan is to provide adequate houses to all of its population, with special interest

1
towards the low income group. (Shuid, 2004). This has been a national issue for several
decades. There are several housing policies in Malaysia which was created in order to
address the problem of housing and solving issues related to it. Policy are been created in
order to solve problem by created by certain sector and not causing for complication and
issues to it. The cases with Malaysia are with certain policy imposed, the more issues it
would bring out. One of the most common policies related to housing in Malaysia is
policy about housing ownership and the procedure of owning a house.

The issue brought up by the Sell then Build policy has been on the surface for
several decades. In Malaysia, owning a house is not an easy task as it would explain
further in a later part of this essay. Hence, it can be very frustrating to the buyer and
public whenever there are a lot of malpractices in the housing industry in Malaysia such
as defective houses, shoddy workmanship, delay and even abandonment of project due to
the practice of Sell then Build policy by the developers in Malaysia.(ISIS Study Team,
1997)

2
2.Housing Policy and Housing Development in Malaysia

To be in general, as the Malaysian government is separated into the federal and

state, the federal is not the only one responsible for housing supplies in Malaysia, as the
state government and local authority has their parts to play as well. The Malaysian law
has enacted a few laws to look after or to be a guideline for housing development in
Malaysia such as National Land Code 1965, Malaysian Land Acquisition Act 1960,
Town and Country Planning Act 1976, Environmental Impact Quality Act, Street,
Drainage and Building Act 1974and Malaysian Building By-Law as well. This has shown
the Malaysian government is serious in their aspect of housing development and
producing affordable and sufficient houses supply to the country. The housing need must
be fulfill by the government. Housing needs in this context is defined as the Quantity of
housing that is required to provide adequate housing to the population without taking into
consideration individual household’s ability to pay (Chander,1976;Ratcliffe,1981;
Noraini,1993;Golland&Gillen,2004 cited in Alias, Johar & Ho ;2008)

The Malaysia Plan has incorporated housing policy in their plan from as early as
the 1st Malaysia Plan (N. Idrus & Ho ;2008). This clearly shown the government has
shown commitment towards addressing the issues of housing with the focus on demand
and supply of affordable house for the population in mind as early as 1966(during the 1st
Malaysia Plan). All this housing policy formulated in the Malaysian plan has its own
objective to achieve such as in table 1.

Under various Malaysia Plan as in table 1.0 , the clear things to be notice is that
the housing in Malaysia is a government intervention type and not solely based on market
force. All the initiatives in the various Malaysia Plan has enable sufficient affordable
houses been built in the country. However, various edition of plan has different target and
objective such as low cost housing for low income group, basic human settlement
concept, housing for low income group in urban area with various strategies such as
involvement of private sector in providing low cost housing, set the ceiling price for low
cost houses and low medium cost houses, guidelines and new laws set to control private
developers, and other strategies as well.

3
Sources: Various Five year Malaysian Plan in Shuid,S ,2004)

4
 Many developing countries are coping with the pressure of ensuring their
population gain access to sufficient houses and Malaysia is not isolated from that
category as well, the various strategies in the various Malaysia Plan to address various
housing issues is only mainly related to one issues if carefully look into and study, which
is the issue of housing supply. From the supply of low cost houses to the supply of low
medium cost houses and from the government as the main key player (before
Independence till First Malaysian Plan) to the private sector (1971-2000) and back to
government (2001-2005) (Shuid ,2004). The solution to the issues of affordability has
always been initiated by government as well with the control of the price of houses by
setting ceiling prices to all the houses except high cost houses. All these has critically
shown the government main intention to provide enough houses supply to the public and
make as affordable as it could in the planning system through Malaysian Plan and all
those development and vision plan in launched till now.

Malaysian is experiencing population boom at a fast increasing level whereby the

population of 23 092,940 of 2003 has been increasing to 25,715,819 on 2009.
(IndexMundi, 2009) With the ever-growing population in Malaysia, there is a need to
sustain the production of houses accordingly to the population growth. According to the
Malaysia Plan, 800000 units of houses were targeted to be built in Seventh Malaysia Plan
and 782300 units were targeted in Eighth Malaysia Plan. In the Ninth Plan, a total of 709
400 units were targeted and supposed to be build.( Yasmin et al 2010) However, good
plan and nice statement is always something nice and practical to see and hear. The
question would remain how practical it is the plan and has it really achieved its target of
allocating affordable houses to those in need. The private sector plays a huge role in
housing development in Malaysia and helping out the housing industry. (Table 2)

5
Table 2

Sources: Ministry of Housing and Local Government, 2010

Housing production and target to help cope with the population growth is not an
easy task. Besides building new houses, there are also the repair works for old and
previously deemed unsafe houses. The requirement of housing need is increasing every
then and now. Table 3 would show the numbers and the Malaysia’s target of housing
production need. The current housing requirement has shown an increased from the target
and requirement in the 2001-2005 targets which support the claimed the housing
requirement increased from time to time as there are huge increases in human population
in Malaysia.

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Table 3

Sources: Ministry of Housing and Local Government, 2010

Generally, the overall total houses needed in between 2006- 2010 which is under
the Ninth Malaysia Plan is at 709, 400 as pre-mentioned earlier. These figure is definitely
a huge figure and by no mean, easy to achieve without much effort been emphasized into
it. Housing development and housing ownership issues would come into the picture here,
the nice question would be how much is enough and how much is affordable is often
linger around Malaysian housing policy makers.

There are basically several types of housing which been separated to the public
sector and private sector. For the public sector, they are usually in charge of several
programes such as the low cost housing, housing for the hardcore poor (PPRT) , housing
for commercial agency, Housing by land scheme, and Institutional Quarters Staff
Accommodation. The public sector main target for housing delivery would be on housing

7
for the poor and low cost housing. The private sector are usually active through private
developers and cooperative societies in providing houses such as low cost (just a portion
of it), with major focus on low medium cost, medium cost and high cost where they could
gain more profit from it. (Ministry of Housing and Local Government, 2010) These
several types of housing is been carried out to cater the housing needs of Malaysian
population. Without a careful planning and execution like in Table 4, the housing
industry could be suffering from insufficient housing supply in the near future.

Table 4

Sources: Ministry of Housing and Local Government, 2010

8
3.Housing Ownership in Malaysia.

Housing Ownership in Malaysia is not complicated though; there is only one

question in mind. It is about affordability. The question of affordability would be raised
up when a person are seeking the intention of owning a dream house of his own. This
would definitely raise a question on the issue of affordability to own a house in Malaysia

According to the table below, it has clearly stated the different category of
housing type available in Malaysia and its price range from before June 1998 and after
June 1998. According to the table, there are 4 type of housing which are the low cost, low
medium cost, medium cost and high cost houses with the different type of price range. As
the price range for houses should be vary a lot and increased substantially by now, the
table below is still a good indicator of the various prices for various types of houses in
Malaysia. By just looking at the table, it is not a small amount at that particular period to
purchase a house and the amount might have increased by 50% nowadays for all houses
with the exception of low cost houses. T

The allocation and development of various type of houses has ensure affordable and in
demand houses been fulfill by the Ministry of Housing and Local Government and the National
Housing Department as well. This is where other than the common low cost houses, houses such
as low medium cost , medium cost and high cost has been construct and developed as well but
mainly from the private developer side. These other category of houses is extremely important as
it cater different housing demand by different public group. The question is whether it is
affordable for all those in demand of these types of houses. The ceiling price set by the
government is only applicable for low cost only and maybe to a certain extent up to low medium
cost house price. Those medium cost houses and high cost houses prices are not really been
control by the government and its fully determined by the market force which can see some house
price at certain place can shoot up fast and high like in Penang , Kuala Lumpur and Johor Bharu.
(Wang, 2001).

9
Table 5

Low cost housing is one of the many efforts been planned and executed by the
government with a big hand from the private developers to make houses affordable and to
make housing ownership easier. The PAKR (Program Perumahan Awam Kos Rendah) or
Public Low Cost Housing Programe is the government initiatives in providing sufficient
supply of affordable houses has been successfully implemented for several years. The
private sector participation has increased since the Second Malaysia Plan, when the
federal government sought the cooperation of private developers in the provision of low-
cost houses through its policy of making it mandatory for developers to build at least
30% low-cost houses in their housing projects(Ghani&Lee,1997). N.Idrus & Ho (2008)
also elaborate on the provision of low cost housing by the private sector which is 30%
started from the Forth Malaysian Plan of the residential development project that they
proposed. The construction of these low cost houses as well must be built according to a
specified standard and requirement such as 3 bed rooms, 45 -56 m² for floor space, living
room, kitchen, bathroom, toilet and a drying area. (Ministry Of Housing and Local

10
Government, 2002) By this method, it surely increases the supply of affordable houses
especially the low cost houses to the in need public.
One may argue that there are a lot of funds available for enabling housing
ownership easier and making the issue of affordable house solve. According to
R.Thillainathan (1997), there are several loans available for housing related financing for
the public. In the private sector, there are financial loan provided by the financial
institution for example; banks and there are also financial loan provided by the non-
financial institution which is solely for their own employee. The public sector also does
their parts as there are housing loan available for the public to apply at the Ministry of
Housing and Local Ministry. (Ministry of Housing and Local Government, 2010)

Housing loan scheme is one of the incentives initiated by the public sector or the
governments for lower income group to built their own house or buy a fully built low cost
house. The scheme which is called Housing Loan Fund has been approved under the
Financial Procedure Act 1957 (Amendment 1972 ) on 17 December 1975. The fund is
entrusted into a trust account with a rolling capital of 70 milion. (Ministry Of Housing
and Local Government, 2007) The rationale of this fund is to provide a minimum fund
for the lower income group to have at least basic accommodation and with this facility
the Government would be able to provide suitable and satisfactory housing
accommodation to raise the standard of living of this. (Ministry Of Housing and Local
Government, 2007) The maximum amount of the loan entitled to the borrower is RM 20,
000 and the basic criterion for the loan to be eligible for the loan by the borrower is as
below:

11
 The loan will actually increase the possibility and affordability for the lower
income group to purchase a house of their own in terms of overcoming issues of
oversupply where houses were not able been sell to the public and target group as they do
have the necessary adequate amount of money to purchase the house. The money
provided by the fund for constructing house at the borrower’s own land is another good
measures to overcome insufficiency of affordable house as they are able to use the fund
made available to construct a house which is affordable and not out of the budget at their
own land .
In reality, the Malaysian housing industry is not facing the issues of insufficient
houses been built for those in need of affordable houses as shown by table 3, but the
society are facing with another major issue which is the abandoned project issue of
housing in Malaysia.

TOTAL NUMBER OF ABANDONED HOUSING PROJECTS

(PENINSULAR MALAYSIA)
Estimated
No. of
Year ending No. of houses No. of buyers Value (RM
projects
million)
2000 514 107,702 68,340 7,524.41
2001 544 125,649 80,070 9,496.68
2004 227 75,356 50,813 7,033.08
2005 261 88,410 58,685 8,043

Source: Ministry of Housing and Local Government (Monitoring and

Enforcement Division,2006)

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 Although by looking at the table above, the number of abandoned projects has
decreased simultaneously from 200 till 2005, but the figure could be dispute and not
convincing enough as with common sense lingering around, it would bring out the
question how on earth the Malaysian government can be miraculously reduce and revive
the so many abandoned projects in a short period.

Nowadays, abandoned projects has been a critical issues for the past two decade
and been detected from as early as 1983. The abandoned project definition which based
on the website from the Ministry of Housing and Local Government (2007) is a project
that has stopped all its construction activities for 6 months or more after the expiry date
of the first Sales and Purchase Agreement. The common problems that leads to
abandoned project are usually related to financial flow of the developer company,
technical problem , a proper market research and study has not been carry out, and others.
One of the incentives and initiative to solve the issues of oversupply house where some
has already been categorized as abandoned project nowadays is to by revitalize the
abandoned projects in order to solve issues such as insufficiency of houses. The ministry
has been able to revived a total of 126 projects which involved 36, 105 units of houses
and 27, 539 buyers. (Ministry Of Housing and Local Government, 2007) However,
reviving the project is way too late as at that particular time, the home buyer might have
been suffering huge losses from the irresponsible act of certain developers.
However, the sad case is there are still about 270 abandoned housing projects and
which involved 88,769 units of houses, 60,348 buyers, and a total value of RM 84, 57.02
million. (Ministry Of Housing and Local Government, 2007)

The issue of abandoned houses has brought up the much heated debate about the
Sell and Build concept which has been serving the country housing industry for a several
decade and trying to replace it with the pre-thought safer concept of Build and Sell
concept which in the government sense would protect the buyers getting themselves
involved into abandoned housing projects and been con into buying properties which is
nowhere to be seen when the money is handed over.

13
 Thus , the concept of Build and Sell and Sell and Build would be review in a short
detail matter and carefully to determined its advantages and disadvantages, plus its
debatable point of why it is such an issue for housing industry in Malaysia.

4.The Issue of Sell and Build or Build and Sell? (Housing Delivery
System)

4.1Sell Then Built /pre-completion sale

Sale of houses that are yet to be built.
(Zulkifli, 2000)

Sell first before the houses are built.

(MHLG, 1999)

Buying off the plan – buying a particular houses based on plans

provided by the developers’.

(The Edge Daily, 2005)

Recently, The Sell and Build Concept which has been serving the country well for
several decades was deem to be unsafe and could not protect the buyer from fraud and
risk of buying a house which is not fully guarantee. Undeniably, both concepts which are
the Sell and Build and Build and Sell have its own implication, plus pro and cons to be
examine further.

The Sell and Build concept or often been referred as “Buying off the Plan” notion
is something not new to Malaysian as this kind of concept is not just happening in the
housing industry. The selling off of a house is just by a mere advertisement, banner,
module and show house without any real property on the exact land to be seen prior to
agreement of purchase. National House Buyers Association (2004) defined Sell Then
Build or STB as the house was sold before it was build. This kind of concept happen all
over the place and were been used by many industries as well from the selling of car to

14
the agreement of building up a machine which is pre-based on plan. However, the Sell
and Build concept for housing industry is not solely on paying the whole amount of
money even before the project start. The concept is simple and not difficult to understand
as it is dealing with the buyer paying up a 10% of the agree payment of the house
purchase for the development of the project and the money could be used by the
developers to finance their project. Then, the buyer would pay progressively the balance
of money according to the phase of the project development and construction by taking
up loan such as end financing loan.

This concept took a heavy backing and liking from the players in the housing
industry in the sense that it allows the developer to collect payment and sell the properties
even before the construction start. The developers will often try to sell as many units as
possible of the houses once the approval of building plan and planning plan or
development order which will enable the developer to collect partial payment from the
potential buyer to co-finance the project .The developers will then start the construction
work for the properties which includes those unsold house as the cost has been managed
to be covered from the pre-payment made by the other buyer. It is well to say that the
developer’s financial burden has been reduced significantly at this level which enables
them to not feel even a pinch of their own pocket money.

In short, the house buyer would partly finance the developer’s cost for the project
via the house buyer individual’s end financing loan obtains from bankers or financial
institution. The developers might also obtain a bridging loan in order to cover the cost of
the construction as well as a kind of progressive payment to cover the development cost
for the pending payment of house buyer. (The Assosciaton of Banks in Malaysia, 2009)

By looking at this concept, this concept is quite similar to the concept of buying a
newly launch car without even have a try on how comfortable and nice or how is really
looks like in reality. Picture this, there is a new car by going to be launch by the
PERODUA and all the buzz and hype are getting to all Malaysian as it’s the latest vehicle
made in Malaysia and most important, affordable for most Malaysian. But, the buyer
would be coaxed by the salesperson to pay a down payment for the car and order the car
even though some of them have never seen that car in real and even have any physical

15
contact of it. What if the design will not be similar to the one illustrated and pre-
advertised? The question would remain to be pondering for quite some time of how Sell
and Build concept can be particularly more efficient and less faulty.

The Process of STB

There are a few clear advantages of using the Sell and Build concept from the
developer’s perspective and purchaser’s perspective as well. Firstly, from the
developer’s perspective, the developers can actually secure a pre-commitment towards
the projects that the developers are currently developing. In details, the developers would
not be worrying about the problems of no buyer for their projects when the projects
completed in the future and worry about the demand for the houses as well.

In another advantages, the developers can have early data collected relating to the
demand of the houses been constructed, changes and room for improvement once the
selling of the houses project started. Changes are usually not common during
construction except for special case and with the identification of the weakness of the

16
projects; changes can be formulate in order to solve the issue. This is extremely important
as the all this data will be a determinant factor of other similar project success in the
future.

From the developer’s perspective as well, the advantages of sell and build is the
finance advantages. In term of finance, the developers have more options and funds when
they are using sell and build where they have financing such as bridging loan, term loan
and end financing plus the money received from buyers. What is bridging finance?
According to Ng (2007), Bridging finance is about a loan with a flexible repayment
period and the main purpose of the loan is to cover the cost during construction and
during the early stages of the construction when often the finance are facing deficit.
Having bridging loan allows them to increase their capital for the development and cover
the cost of construction at early stage or during the construction. Bank term loan is
another types of funding the developers can obtain in order to have a larger capital to
cover the cost of construction.
“Term loan is usually a loan given to an individual or company which requires the
borrower to pay back in a period agreed according to the agreement. A bank loan to a
company, with a fixed maturity and often featuring amortization of principal. If this loan
is in the form of a line of credit, the funds are drawn down shortly after the agreement is
signed. Otherwise, the borrower usually uses the funds from the loan soon after they
become available. Bank term loans are very a common kind of lending” (Investor
Word.Com, 2010).

The Relationship between Bridging and End Finance under STB

17
 End financing will usually come in to the process in the middle of the
construction where the maturity of the bridging loan has reached the repayment period.
End Financing is about loan given to the purchaser who is purchasing the house from the
developers. However, bear in mind that the purchaser will not get their hand on the
money as all the money will be paid progressively during construction to the developers.
Zulkifli & Abdul Ghani (2004 in Ng;2007) defined end financing as the funding provided
(or payment made) by the house buyers and their bankers to the developer. Ng (2007)
also mentioned one of the advantages of the end financing loan when she said that once
the sales of the house is secured, the project would have a self financing constituent. The
amount of money will be paid progressively at the various stage of construction and
based on construction work done by the developer with an Architect Certification Form.
The loan would be disbursed by the end financier which is usually the bankers and they
are to ensure the money would be disbursed correctly and accordingly to the stages of
completed construction. (Ng ; 2007)
It is clear there is no clear disadvantages for the developers when the concept of
Sell and Build are been used. For certain, most of the developers from small and medium
has heavy liking on this concept with so many advantages it can provide to the
developers.

18
 From the buyer’s perspective, the buyer’s do have a few advantages to be
highlighted if been carefully look into but there are disadvantages that come along as
well. The advantages that the sell and build can provide to the buyers are as below:

1. Investment Factor - If you purchase early in the construction phase or even

before the construction has started the investment value of off-plan properties is
very good. Initially the prices are set below market value to attract investments,
which help the promoter finance the construction. Furthermore it is possible in
many promotions to re-sell the property before completion and make a decent
profit.
2. Early Purchase - If you purchase at an early stage it is also possible to choose the
best properties i.e. with the best views, penthouse, corner etc.
3. The Seller - When you buy a property under construction you will buy directly
from the promoter. Although you buy through an agent you only pay the price set
buy the promoter and you therefore don't have to finance any agent fees.
4. Guarantee - New buildings include a 10 year guarantee for main failures in the
structure, roof, etc..
5. Being New - You are the first to occupy the property and can therefore
personalize it as you wish. You don't have to pay expensive changes to things the
previous owner has installed.
6. Availability - The offer of off-plan properties is at the moment very good with a
lot of different options available all over.
7. Price - The prices for new promotions are set by professional developers that
have a much greater knowledge of the market value (compared to private sellers)
and you will therefore not find major variations in prices for off-plan properties of
same standard. The difference in price is reflected by other factors such as the
standard/quality of the development, the location, views. etc..

Sources: (Accom Consulting Spain, 2001)

With all the advantages for the buyer, the buyer will often think they are at the
winning end. However, this is not the case and scenario when the disadvantages come
into question. Among the disadvantages are as below:
1. Seeing the Property - When buyer buy off plan buyer will not be able to see the
finished product (the property) until the completion of the construction.
Time - To be able to get a good and cheap property under construction buyer will
have to buy early, which of course means that buyer will have to wait a long time
before the buyer’s property is delivered. (normally about 6 months to 3 years after
the initial planning has started).
2. The Area - The area of the development can change - although you inspect the
plot where the construction is going to be build , the buyer never know how the
area is going to change during and after the constructions (lawyer should look at
the local town plan for the area although new licenses can still be given after
decision to purchase been made).

19
 3. Late Purchase - If buyer buy a property under construction in the final phase the
investment value will be significant lower than an early purchase and the best
properties will have been sold.
4. Delays - A high percentage of all new constructions in Spain are delayed either
because of bad planning or because of some problems with getting the final
licenses.
The best way to make sure this doesn’t happen is to buy from respected promoters
and to make sure there is a penalty in the contract in case of delays.
5. Bankruptcy - The point many buyers fear is that the constructer goes bankrupt or
that the qualities of the property are not according to the information given before
the purchase. Again the best way to ensure the above doesn’t occur is only to buy
from promoters / constructors that already have a good reputation and you should
also make sure that a bank guarantee and insurance are in order. Buyer should
also assure that all the rest of the papers are in order such as building licenses etc.
as these are the most frequent reasons why a construction is not completed.
Sources: (Accom Consulting Spain, 2001)
With the above disadvantages, it surely weighs a balance from the advantages to
the disadvantages of the Sell and Build Concept. The Sell and Build Concept has augurs
well for the country in its several decade of application. The only question been raised is
when the abandoned project been detected from early as 1982 and the concept efficiency
has been in doubt since with many especially from the stakeholder which are the buyers,
publics and others crying foul for the issue. There is reasoning for using a concept for so
long and the reason is simple for the concept of Sell and Build. It makes life easier for
developers and fund is not a problem under this concept, plus the concept has produced
3.5 million houses successfully in a life span of 30years and the system has served the
country well for over 30 years( The Sun, 29 September 2005). If the concept is so much
of a problem, it is for sure that the 3.5 million houses would not be successfully delivered
till now.

The abandoned project issues should not be fully blamed to the concept of Sell then
Build. The Ministry of Housing and Local government (2007) has identified the one of
the main problems for a abandoned project is actually related to the financial status and
flow of the company. It is common for a small company to channel its fund from a
separate project to fund another project. This method has actually created a lot of
problems as direct cash flow for certain projects has been redirect to other projects which
will create a huge risk to the company in terms of finance. With the huge risk, the
company face the possibility of having miscalculation and lack of capital which resulted

20
the company to cease operation and simply run away. This is how abandoned projects
happened with some company.

Do not blame on the concept alone as the concept is some kind of a fixed thinking and
idea. Put the blames towards the individual who has been given the right and developers
as they are the one who misused the fund and the benefits of the concept for other
purposes.

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4.2 Built then Sell

Selling of completed property with Certificate of Fitness for Occupation (CFO).

(Zulkifli Ahmad, 1999)

A system where the developers are required to build and complete their housing
project first before selling the completed houses to the house buyers.

(HBA, 2005)

Build then Sell (BTS) is one of the concept proposed by the previous prime
minister of Malaysia, Datuk Seri Haji Abdullah Ahmad Badawi to help look after the
buyer interest who are buying houses and to counter the problems created by Sell and
Build. The previous prime minister also encourage the housing developer to adopt the

22
concept of Built and Sell in 2004.(Ng,2007) In 2006, the government announced that the
BTS will be executed along with the STB (Sell then Build) for a period of two year of
transition period and further evaluation will be review further along the two years period.
(Ng; 2007). The BTS is actually a procedure of sales and purchase involving a completed
unit of the house. It is a completely different with the STB concept where sales process is
not involving the actual completed unit. The BTS has been fully adopted in several
developed countries in the likes of United Kingdom, U.S and others, which has been a
success story in their country. Thus, with the success of BTS at developed countries, the
Malaysian government are trying to impose the same concept in order to solve issues
related to housing such as abandoned housing projects.

23
 Like the STB, the BTS has its own advantages and disadvantages which is a clear
debatable issue to argue as well. The clear advantages of the concept clearly go to the
buyers perspective where many has argue that the concept can actually protects the
buyer’s right. The buyer’s right would be protected in terms of the losses can be reduced
to a minimum amount of 10% from the full amount of agreed price to be paid for the
house as progressive payment would only be made once the completion of the housing
unit. Thus, it is adopting a method of 10:90 concept where 10 % been paid in advance for
the housing unit and the balance of 90% will be paid progressively after the completion
of the housing unit. (Ministry Of Housing and Local Government, 2007) This will ensure
the losses that the buyer will suffer has been reduce substantially to a lesser amount if any
risk related to the project in terms of developers abandoning the projects and delays.

Next, another advantage would be the concept was mention by a lot of parties and
individual that the concept can solve the issues of abandoned projects in Malaysia. As the

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country abandoned projects is at 270 abandoned housing projects and which involved
88,769 units of houses, 60,348 buyers, and a total value of RM 84, 57.02 million.
(Ministry Of Housing and Local Government, 2007), the Malaysian governments need to
plan or make changes to the current housing policy and housing construction policy as
well. Thus, the BTS has been introduced and has been widely promoted of the concept
usefulness in solving the issues of abandoned projects in Malaysia. Thus, it is said it will
protect the buyers from going through the agony of abandoned project. The other
advantages that are associated with buyer perspective is that they can actually see the
property before making the final decision of buying the house.

The disadvantage for the buyer is that the pricing maybe something higher as the
developers can transfer all the cost of the construction towards the end buyer part which
means end buyers would have to bear most of the cost from the buying price. The price
would be even higher the STB even if for the same range and type of projects.

The disadvantage part if been look carefully is only related to the developer’s
perspective, with the first disadvantages is surely something to do with. finance matter It
is argued that some financial institutions may be reluctant to provide the loans for such
BTS schemes (Salleh Buang, 2006 in Ng; 2007). They prefer granting end finance to the
purchasers rather than giving bridging finance to the developers at higher risk (Wong,
2006in Ng ;2007). Built and sell will surely cut down the options for other fund made
available for them during the initial stage and construction. Under STB, the buyers partly
finance the projects through end financing according to the stage. (Ng; 2007). Unlike the
STB, the BTS will only receive progressive money after the completion of project which
mean money comes in after project completed. Even with bridging loan and term loan are
still assessable, a lot of their own capital would need to be use and the interest is high for
the loan that the developer obtain in order to cover the cost during construction and for
sure, the interest would be charge toward the end buyers once the project completed. (To
Build and Sell or to Sell and Build, 2010)

With the loan is only option in mind, the other disadvantage would surge up with
the issue related to financial institution or bankers. From the developer’s perspective,
they need to apply for loan in order to bear the cost of construction and other. However,

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from the banker’s perspective, it has raise out the question of risk whether the developers
would successfully repay the loan or not. Most of the risk and burden are now with the
developers and bankers instead of buyer. As if they could not secure the loan, some small
developers without huge capital would not be able to even start the project. The financier
would only release loan to those with sounding capital and strong position in paying back
the loan. This has brought out the consequences of only the rich will be getting richer and
the poor getting poorer when the loan is only given to large company and smaller
company will only have smaller percentage of securing the loan. Under the BTS
scenario, very few developers will have the financial capital or capacity to carry out
project development on their own without other sources of financing from house buyers
or end financiers (Rehda, 2004 in Ng ;2007)

The housing development industry would also slow down as an effect of the
application of Built then Sell Concept. This is where the Built Then Sell concept could
bring a devastating effect to the industry as well.

Many argue that the contractor are just a sore loser who does not want to lose out
a large chunk of their projects profit, but do anyone has ever step in to the shoes of those
small contractor about their stands on the matters? The answer is clearly a no, as small
developers would never survive and do stand a chance to get their hand on huge projects
under this concept. This would leads this small developers use other dirty tricks such as
faking the company financial status and creating a non-existing company and many more.
Thus, the issue of abandoned project does not necessary happen when applying the Sell
Then Build concept but it might also applicable to the much hype and hope of Built Then
Sell concept as well.

The big fish, referring to the big companies of developers, would be facing
problems as well. This is because they will be running into debt capital financing to
finance their company. Given the current scenario face by the small developers and big
developers, the housing industry would surely lack of housing supply as most of the
company could not built a lot of projects at the same time or sub projects which the
profits earning is less. If these trends continue, the house prices in the country would
increases simultaneously. REDHA president, Datuk Jeffrey Ng has highlighted the

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possibility of the BTS to slow down the market and housing industry as well. (To Build
and Sell or to Sell and Build, 2010).

With so many disadvantages actually siding to the developers side , no wonder

since 1991 till now , there are still a lot of developers objecting the usage of the BTS. The
BTS will surely have it advantages as well in terms of protecting the buyer but how far
does BTS can do in terms of protecting them from abandoned projects, none actually. As
even with BTS, the issues of abandoned projects are not solved completely as many
companies would still be facing financial problem.

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5.Recommendations

One cannot hide from the fact that Build then sell is still the way to ensure home
ownership is at minimum risk for the public and consumer. However, the approach of
Build then Sell in Malaysia still need a lot of changes and should be implemented with
drastic changes at the current housing policy of purchasing and owning a house.

Very often, the developers would complain of the various red tapes and delays it
experienced when getting approval for their project. These delays and red tapes from the
public sector would generally incurred heavy losses in term of time and interest which is
been charged by the banks to the developers. It is understandable as when the Build then
Sell take place, the developers would be the one suffering from all those increase of cost
and time. Once there is a delay in getting approval for the project or other related
approval, the developers could be charged with a higher interest for the loan that the

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developers have taken earlier from the financial institution. So, one of the main solution
to makes Build then Sell work and reduced the probability of abandoned house is by
reducing delays in approval process and cut off all the red tapes. (ISIS Housing
Study Team, 1997)

From the private sector view, with Build then Sell at the helm, everything is
associated to efficiency and effective from the private sector and public sector. While the
private sector should be operating under a stricter and more competent environment, the
public sector from the government-local, state, and federal should be operate in the same
manner as this would be able to ensure a more efficient delivery of projects and smooth
process of governance especially those related to housing. Hence, the term of efficient
and effective should be implanted in the public and private sector altogether for a
better result in getting Build then Sell successful. (ISIS Housing Study Team, 1997)

Next, one of the way to make Build then Sell more successful than its
predecessor, the Sell then Build and to ensure house ownership without much problems ,
is by raising more awareness related to housing and allow the buyer and publics to
exercise their rights for the product they purchased which is in this case, the house.
With more freedom to information and details related to the housing industry, it can make
the right of these buyers to be protected. With more transparency of rules and regulations
related to the housing industry , the buyer and the public could at least ensure that they
know all the do and don’ts plus they would be fully aware of any hanky panky if there is
one by the developers. For example, the NGO’s such as CAP( Consumer association of
Penang and others can do their part in ensuring the basic information on housing and
articulate information related to procedure and purchasing of houses been provided to the
public. Other related ministry could also lend a hand in making the Build then Sell more
successful such as The Ministry of Domestic Trade and Industry to work together with
Ministry of Housing and Local Government to look after the rights of these buyers. (ISIS
Housing Study Team, 1997)

Last but not least, the government should do its parts as well in ensuring there
are no problems in house ownership and promoting Build then Sell in Malaysia. The
government role should ensure that every rules, regulations and procedures are

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appropriate and adequate in order to ensure the housing ownership issues would not be
having any problem. There is no point by having all the good policies, rules and
regulations where there are no enforcement to ensure the whole things is going on
according to the standard and no hanky panky. As suggested by ISIS(1997) , the
government can also facilitate home ownership through fiscal measures. This fiscal
measures implemented can be in such as tax exemption on interest payment of the
housing loan for the 1st time buyer. (ISIS Housing Study Team, 1997) The government
could also introduced bold steps such as those who are purchasing the 2nd unit and those
unit after 1st unit of houses should be paying a more huge percentage of down payment to
the developers rather than the 10 % payable down payment.

Another good recommendation for Malaysia’s government is to emulate and

learn from Singapore. Home ownership in Malaysia is still not that competent if the
home ownership policy in Malaysia is to be compared with Singapore. The HDB
(Housing Developers Board) of Singapore has done a lot of recommendable work in
ensuring the house ownership in Singapore is without a fuss and ensuring everyone
would get its share on affordable home. The way HDB develop housing scheme and
solve national housing issues is basically down to three component of approach which are

• the concept of a sole agency in charge of public housing enabled more effective
resource planning and allocation. This concept made it possible for HDB to
secure land, raw materials and manpower for large-scale construction to
optimize results and achieve economies of scale.

• a total approach to housing was adopted - from planning and design to land
assembly and construction. The housing task was viewed as a seamless whole -
through allocation, management and maintenance.

• strong government support in the form of political and financial commitment,

and legislation helped put the early public housing programme on the right track
to housing the nation

(Housing & Development Board , 2010)

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 The HDB of Singapore clearly shown more effort in providing basic information
and detail information related to housing development and housing ownership plus
everything related to housing. All the information and inquiry related to housing is easily
accessed at their own homepage without much fuss and trouble. With a more clear
transparency in term of the procedure, rules, regulations and guideline which is relevant
to housing by the HDB, the housing related policy in Singapore is definitely better than
Malaysia a lot. The most important part is that the HDB also adopt a Design, Build and
Sell scheme(DBSS) which is something similar to the Build then Sell concept which
Malaysia are trying to impose nowadays. The reasoning behind the application of this
scheme is Under DBSS, the developer tenders for the land and enjoys flexibility in
designing, pricing and selling the flats subject to the relevant legislation and rules to
preserve the character of public housing and ensure building quality and safety.
( Housing & Development Board , 2010)

In terms of performance wise, the HDB of Singapore surely did a very good job in
promoting home ownership with public housing project. One of the main indicator of
success by the HDB is there are currently 85% Singaporean who are living and owning a
houses by HDB. This is a good exemplary of result in public housing and ensuring house
affordability and home ownership at parallel level of importance.

With only all the good things can be emulate and learn from Singapore, Malaysia
should actually be bold enough to learn from their South East Asian counterpart.
However there are some limitation and critiques as well in terms of geographically and
demographically. One must understand that Singapore is relatively small which is why it
is easier for the government to control everything in the city state.

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Conclusion

As a conclusion, in a personal opinion argument, the STB and BTS have its own
advantages and disadvantages and both must be used parallel in order to ensure a
carefully planned development for housing and ensuring housing ownership issue to be
solved. To be honest, both have its own issues and problems as well. However, if the
BTS is been launched solely, a lot of the small fish of developers would suffer and only
the big developers can survive and improve. The situation would also affect the
Malaysian housing industry as well. This is extremely true when REDHA president,
Datuk Jeffrey Ng has highlighted the possibility of the BTS to slow down the market and
housing industry as well. (To Build and Sell or to Sell and Build, 2010). The BTS surely
would affect the market a lot and the developers as they do not have as much as they can

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have for financial backing in the early stages or construction period. However, BTS is the
only recommendable solution to the issue of housing delivery and housing ownership
plus protecting the rights of the consumer.

Home ownership issue and issue of abandoned projects can’t be solved straight by
just implementing Build then Sell and replacing it form the Sell then Build. It is the
collective approach from the government and the major player in the industry such as
developers, planners, financial institution and others which would ensure those issues
related to home ownership and abandoned project issues can be solved. Emulating
Singapore in their housing policy might be a good way in dealing with public housing
policy and ensuring the issue of housing ownership and other housing issue is not an
issue anymore but it is not fully practical as there may be some complicacy in emulating
them.

Thus, in order to ensure a better projection of impact and to look for the right
solution of housing policy related to housing ownership and housing delivery, a
delinquent study by the government should be done before any decision be made on
which concept to be used better and how to utilised it.

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