House purchase: Opt for build-then-sell system

10/08/2007 NST By Brig-Gen (R) Datuk Goh Seng Toh, Vice-president, National House Buyers Association

I read with a heavy heart the story  T.L.L of Muar had to tell about her condominium-buying problems ("Builder turns gift into a huge burden" - NST, Aug 7). What started as a gift, when T.L.L.'s late husband bought her a condominium in 1995, is now a burden for her because the developer has not completed the project.

She is now being blacklisted by the bank and could not even take a car loan.

For a single mother to be put through such an agony, through no fault of her own, is indeed a pathetic situation.

There are thousands of such victims of abandoned housing projects who are suffering in silence.

This situation is brought about by the present flawed system of selling houses that is, the sell-then-build system. It basically means that the developers are using house buyers' money to pay for their construction costs.

When their projects are not successful and they are not able to hand over the houses, the house buyers get into serious trouble.

Builders simply should not be paid before they have completed their projects. By doing so, we have unwittingly created a situation where house buyers, who are not business participants, are forced to carry the business risks of developers.

The government had announced that a build-then-sell variant called the 10-90 system would be allowed to operate concurrently with the sell-then-build system.

Basically, it means that a buyer pays 10 per cent upon signing the sale and purchase agreement. This 10 per cent is held in trust by a lawyer.

When the house is completed, the buyer pays the remaining 90 per cent and the sale is completed.

If, for whatever reason, the developer is unable to complete the house within the stipulated time, the buyer is at liberty to demand the return of the 20 per cent held by the lawyer and the deal is off.

This is far safer and fairer deal, and house buyers should be more discerning before they make a choice. Avoid those projects that still cling on to the sell-then-build mode, unless you are prepared to join the ranks of T.L.L. You can surely make a difference.

As for T.L.L, our symphathies are with you and it is stories like yours that enforce our members' resolution to strive harder for a more orderly housing industry.