The planned implementation of the build-then-sell (BTS) concept as an obligatory system will likely sit well with financially stable, established developers but may be a burden to smaller, less resourceful players.
“This system means that developers have to complete the project first before they can start selling and earning profits,” said an industry observer.
“This may be alright with the large players that are financially sound. But for the small ones (developers), they may not have the resources to finance the entire project and have no choice but to start selling as soon as they can.”
An analyst at a local bank-supported brokerage agreed, saying, “The BTS will end up burdening the developer financially and this could result in higher selling prices, as the cost of development would be more, as they (the developers) have to rely on full financing throughout.”
“In the worst-case scenario, housing prices could spike and bankers may not want to risk issuing loans under a concept where houses are only sold once they are completed and have been issued the certificate of fitness for occupation.”
The implementation of the BTS system could lead to an increase in abandoned projects, he said. “Developers that can’t finance the full project will end up abandoning it.”
However, another analyst said projects were still abandoned even under the existing “sell-then build” (STB) system.
“The BTS system will probably mean that only the fittest will survive. This means that projects will be undertaken by sound, reputable developers rather than fly-by-night ones. At the end of the day, it’s the consumer that gains.”
The BTS mode of house ownership will likely become mandatory by 2015, according to a local news report.
The drafting of the changes to the Housing Developers Act will include a clause that calls for the gradual implementation of the BTS system, said the report.
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February 2011 Property News
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