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Saturday, July 18, 2009

Additional measures needed

Despite having adequate laws in place to throw the book at developers responsible for abandoned housing projects, industry participants say enforcement activities need to be stepped up if the issue is to be addressed effectively.

National Housebuyers Association (HBA) honorary secretary-general Chang Kim Loong says strict monitoring and implementation of the existing laws will ensure the safety nets put in place under the Housing Development (Control & Licensing) Act, 1966 (Act 118) are enforced by the governing authorities.

Over the past decade, the Housing and Local Government Ministry introduced various amendments to plug the gaps in the Act and impose stiffer rules to enhance protection for housebuyers.

Following amendments in 2006, a Housing Controller, who is also the ministry’s secretary-general, has the clout to freeze the Housing Development Account of developers found to be flouting the Act.

Those who commit offences like not opening or maintaining the Housing Development Account or building without licence are subject to higher penalty of RM250,000 compared with RM50,000 previously.

Engineers, architects or trustees who flout the Act could also be fined a maximum of RM100,000 or be jailed up to five years or both.

On claims that there are cases whereby the consultants (architects, engineers and surveyors) may have falsified reports on the stage of a project’s progress to allow the developer to make withdrawals from their Housing Development Account, Housing and Local Government Minister Datuk Seri Kong Cho Ha urges the respective professional bodies to take stern action against their members if these claims are found to be true.

Those who flout the Housing Developers (Control and Licensing) Act regulations and the Housing Developers (Housing Development Account) Regulations will be fined RM20,000 or face up up to five years’ imprisonment.

Despite all of these measures, Chang says abandoned projects continue to persist. With that, he is calling for additional measures. “The shame game that involves blacklisting developers and publishing the names of people behind these companies in major newspapers and the Housing and Local Government Ministry website will be effective to weed out the culprits from repeating their offences.

“In order for this to work, all the loop holes must be plugged to prevent these offenders from resorting to using nominees to avoid detection,” he adds.

Chang urges buyers to be more discerning and verify the reputation and reliability of a developer before signing on the dotted line.

“It is safer to buy from reputable developers that have proven track record of making timely delivery and building quality products. They should ask all the questions about a project and exercise their rights as buyers,” he adds.

One of the most commonly cited measures to help ensure housing projects are completed on time and not end up being abandoned is the 10:90 build-then-sell (BTS) system that was first announced in April 2007 by former Housing and Local Government Minister Datuk Seri Ong Ka Ting.

With the amendment to the Housing Development (Control & Licensing) Act, developers who adopt the BTS system will enjoy fast-track approval for various applications, and a RM200,000 deposit exemption for housing development licences and stamp duties.

Despite the many “carrots” to promote the system, the BTS system is still getting lukewarm response from developers. The main reason cited by developers is that banks are not lending their support and are still insisting that at least 50% of a project has to be sold before a developer can qualify for a bridging loan.

They said without the banks’ support, only financially-strong developers can afford to go ahead to build their projects first before opening them up for sale.

It has been two years since the BTS system was launched and although it was supposed to be implemented this year, it is understood that the law will not be enforced just yet pending a recovery in the country’s economy.

Proponents of the BTS system, which includes the HBA, say it would be one of the best alternatives to protect buyers from the devastating effects of project abandonment.

The association has proposed an abridged version of the BTS system, that will ensure buyers only have to make a 10% downpayment.

Only upon receiving vacant possession with all the necessary pre-requisites (certified fitness of occupancy with keys, ownership papers, utilities supply such as water and electricity) for their house, buyers have to pay up the balance 90% of the house price.

Chang says should a project become abandoned and buyers fail to get vacant possession of their property, their exposure will be their initial 10% deposit.

This makes the revival process easier when the initial exposure is minimal.

“This way, housebuyers are better insulated against project abandonment compared with the present sell-then-build system, where the banks will come after them regardless of whether they have received their houses or not,” he points out.

By The Star (by Angie Ng)

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