Build then Sell vs Sell then Build, why not let the market decide?

House Buyers Association (HBA)’s Chang Kim Loong said that Build then Sell (BTS) is a much better system as it is a much safer mode of home delivery for the buyers. This will also be eliminating the cases of abandoned housing projects. In short, buyers would be protected as they would only be forking out a 10% downpayment and will only start paying for the home once it is completed. Developers would be the one who would be dealing with the bank directly for the development financing. HBA’s Vice President, Brig-Gen (R) Datuk Goh Seng Toh said that BTS concept will ensure house prices are stabilised because no developer would then over-price the homes and risk not being able to sell them. The banks would also want the developers to show proof of committed sales before they would approve the project financing.
Khong & Jaafar Sdn Bhd managing director Elvin Fernandez has a different point of view. he said that if BTS is the sole mode of housing delivery for the country, the market will not be healthy. With the imposition of BTS on all developers, many of these smaller players would leave the development field and this will then lead to reduction of supply and you know what would happen in the future if the supply is reduced continuously. He said that whatever weaknesses in the system today, it can be improved by having a better project financing system and better monitoring of developers.
Personally, I feel that BTS has its valid arguments which is hard to dispute. As a buyer, I think BTS is also one concept I would love if it really reduces the risks on my side and the fact that I would need to worry much lesser even with developers who are developing for the first time. My total loss would be just 10%? However, I do not offer my full support to BTS. I would prefer for BTS to be encouraged through ‘encouragement’ from the authorities and not forced upon all. I have met many smaller developers who build really good homes but if it had been BTS, they may not have been able to enter the market. Secondly, if BTS and Sell then Build (STB) is running side by side, we can then let the market forces decide from whom they would like to buy their projects from. Think objectively, it is not likely that all the STB projects would win. In fact it forces both the BTS and STB developers to really be even more efficient; they price their products as competitive as possible versus each other. I think I should have the final choice.
written on 19 July 2014
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