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Just because the buyer may not know does not mean developer can do anything they want

First of all, if you are a foreigner buying Malaysian property, the protection you get is the SAME as any Malaysian purchasing a property locally. As for the protection, please read on yeah.

Did you know that as a buyer, you are protected IF the developer tries something illegal? As long as what they were doing is contrary to the purpose of the Housing Development (Control and Licensing) Act 1966 and the related Regulations. This was designed to protect the purchasers who are more vulnerable against developers.

Article in thestar.com.my Very important to know are these sentences.

In the stated case, the developer “employed a clever device to attract sales of the housing accommodation in that upon the signing of the SPA, a credit note is given to the purchaser for the sum equivalent to the balance 10% of the purchase price… The developer argued that there was an effective discount via the credit note of RM63,108.00 from the purchase price stated of RM731,080.00 and so the actual and real purchase price is RM667,972.00”.

However, the Court of Appeal ruled that the issuance of the credit note was contrary to the purpose of the Housing Development (Control and Licensing) Act 1966 and the related Regulations, which were “designed to protect the purchasers who are more vulnerable against developers”.

It was decided that “The device of stating a higher purchase price in the SPA when the developer knows that it would be giving a credit note to the purchaser at the opportune time determined by them has the debilitating effect of the banks giving a higher margin of loan to the purchaser who may other not qualify for the loan to purchase the property”. 

It was also held that “The whole landscape of the Schedule H SPA and the HDA, as well as the Regulations, does not countenance a different category or classification of ‘purchase price’ be it a ‘discounted purchase price’ or a ‘reduced purchase price’ or ‘actual purchase price’”.  The article is a comprehensive one and tells the full story. Article in thestar.com.my

As a buyer, it is also very important to understand the actual value of the property we are buying. Just because the price was RM500,000 and the developer gave us a very attractive rebate does not mean that in the future, the price will be RM500,000. Imagine all the buyers were given the same arrangement. Of course, if the market was positive when the keys were handed over, then everything will be fine.

If the market was slow like today, imagine what would happen to the so-called selling price? Are we confident the price could be maintained and that potential buyers would be willing to pay RM500,000 or even higher? Hopefully the answer is yes. However, this is not a small risk to take. Please do sufficient due diligence. For example, what’s the pricing of similar properties in the area? Are there anything special which is available only for this development versus all the others? Are most buyers buying just to wait for keys or are they staying? All these would help us to decide more objectively. Do not buy just because you wanted the money they are giving you… That’s your money anyway. Happy deciding.

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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