Low-cost housing projects lift other property prices

SUBANG JAYA: Middle and high-end properties are getting more expensive partly because developers are passing on the costs they have to bear in building low-cost houses.

Speaking at the 14th National Housing & Property Summit 2011 on Wednesday, Sept 14, Datuk Ricque Liew, secretary-general of the Real Estate and Housing Developers' Association (Rehda), said under the current practice "a lot of low-cost houses are not taken up so the cost [of building the units] has been [factored] into the prices of other property classes".

He added that the government should be responsible for building low-cost houses, as practised in other countries, using taxpayer money.

"Prior to the 1970s, the government had been developing low-cost houses such as the Pekeliling flats in Jalan Tun Razak and Sulaiman Court flats," he said, referring to two of the oldest low-cost development projects in Kuala Lumpur built by the government. The Sulaiman Court flats were demolished to make way for the Sogo mall near Jalan Tuanku Abdul Rahman.

At least 30% of each residential development must have low-cost houses priced below RM49,000 a unit. Currently, 54% is built by private developers, according to the Ministry of Housing and Local Government.

Gurdev Singh, director of policy and strategic planning at the national housing department, Ministry of Housing and Local Government, said the government is not in a position to provide all low-cost units because the subsidy would be too much for it to bear.

Commenting on the implementation of the build-then-sell (BTS) system, which may be made mandatory for all property developers in 2015, Rehda chairman Datuk Eddy Chen said the policy, which has been implemented in several countries such as Australia and the US, is aimed at curbing speculation.

"In China, property developers are allowed to collect 50% of the price once the building reaches the roof. And in China, the building can be topped out in just four months," he said.

Chen noted that  developers in China would not be short of cash as they could collect money in four months, compared with the industry average in Malaysia of about 24 months for a project to be completed.

Chen reiterated that Rehda is not opposed to the BTS system per se, but would want it to be run together with the current sell-then-build practice. This will help property developers which cannot afford to wait until the project is completed.

Chang Kim Loong, secretary-general of the National House Buyers' Association (HBA), disagreed. He said Rehda opposes the BTS concept because the property developers which make up its membership are not willing to leave their "comfort zone".

Chang suggested that the government should make abandoning housing projects a criminal offence to better protect house buyers.

"The ministry should start requiring property developers to start practising the BTS system by next year with 10% of their developments to be launched after being completely built, increasing the percentage until we reach full 100% compliance by 2015," he said at the summit.

Gurdev said the ministry is still fine-tuning the policy and is open to all parties to come up with a system agreeable by all, including developers and house buyers.

"However, policy-wise it should be implemented by 2015," he said.