BUilD-Til En-SEll :

The Way ForflVard

Organized by
Date
Venue
Time
The Institution of Surveyors, Malaysia
f'riday, It th May 2007
Matrade Hall (Level 3), Menara Matrade,
Jalan Khidmat tJsaha, ()ffJalan Duta, Kuala Lumpur
8.00 am to 6.00 pm
: Registration
: Arrival of Guest-of-Honour, YB Dato' Seri Ong Ka Ting, the Honourable Minister of Housing &Local Government
: Opening Address by ISM President, Sr Noushad Ali Naseem Ameer Ali
: Opening Address by YB Data' Seri Ong Ka Ting, the Honourable Minister of Housing &Local Government
Programme:
08.00 am
08.45 am
09.00 am
09.10 am
09.30 am : Coffee Break and Press Conference
10.00 am
10.30 am
11.00 am
11.30 am
12.15 Noon
Paper 1: "Fast-Lane Concept Of 10:90 and One Stop Center (OSCI"
by YBhg Dato' Fadzil Hj Mohd Khir, Ketua Pengarah, Jabatan Perancangan Bandar &Desa Semenanjung Malaysia,
Kementerian Perumahan dan Kerajaan Tempatan (KPKT)
: Paper 2: Concept: The Australian I New Zealand Experience"
by Invited Speaker
: Paper 3: "Making 10:90 Work"
by YBhg Brig Gen Dato' Goh Seng Toh, Yice-President, National House Buyers Association
: Paper 4: "The Legal Implication of the Build-Then-Sell Concept and 10:90 Concepf'
by Professor Salleh Buang
Paper 5: "The Power of Geomancy In Property Development"
by Master David Koh, Founder I Hon Life President, Malaysian Institute of Geomancy Science
1.15 pm
02.30 pm
: LUNCH & NETWORKING
Paper 6: "The Dual Experiences of Bandar Utama Damansara"
by YBhg Dato' Teo Chiang Kok. Director, Bandar Utama City Corporation Sdn, Bhd,
03.00 pm
03.30 pm
04.00 pm
04.30 pm
05.00 pm
'/
Paper 7: "The Role of Bankers on the Build-Then-Sell Concept";
by Invited Banker
: Paper 8: ''The Property Housing Delivery System For Malaysia - AProperty Consultant's View"
by Sr Elvin Fernandez, Managing Director, MIS Khong &Jaafar Sdn, Bhd.
Paper 9: "Mathematical Model on 10:90 System Vs. Conventional System"
by Sr Ong See Lian, Partner, Juru Ukur Bahan Malaysia
Paper 10: "10:90 Concept: The Findings of The Institution of Surveyors, Malaysia"
by Sr Hj Abdullah Thalith Md Thani, Deputy President of ISM
FORUM I DlSCUSSION
06.00 pm
Invited Panelists:
- Sr Noushad Ali Naseem Ameer Ali, President, The Institution of Surveyors, Malaysia
- YBhg Brig Gen Dato' Goh Seng TOh, Vice-President, National House Buyers Association
- Mr Patrick Wong, President, Master Builders Association Malaysia
- Mr Ng Seing Liong JP, President, Real Estate & Housing Developers' Association Malaysia
- Ar Lee Chor Wah. Deputy President, Pertubuhan Akitek Malaysia
- Encik Zulkifli Abas b, Abdul Hamid. Association of Banks Malaysia
- YBhg Datuk Ir Hamzah Hasan, Chief Executive, Construction Industry Development Board (CIDB)
- YBhg Dato Michael Yam, President, The Chartered Institute of Building Malaysia
- Engr Tan Yean Chin, Vice-President, The Institution of Engineers, Malaysia
- YBhg Data' Sr Mani Usilappan, Former Director General of Valuation & Property Services Department, Ministry of Finance Malaysia
- YB Senator Datuk Haji Roslan Awang Chik
: Tea Break/End
-----------1-
1
1
I
1
1
The potential financial impact of the ld.
Then-Sell concept
The legal implications of the Build-Then-
Sell concept 1
The Role of Banks
The advantages and disadvantages te
concept
The impact on abandonment of futurel
projects
Recommendation to Govemmenl based
on forum/discussions
7
3.
This Seminar aims 10 look into the following:-
1, The effectiveness of the BUild-Then-11
concept
6.

$2
)
4.
___ 5.
Official Opening & Keynote Address by'
YB Data' Seri Ong Ka Ting
Minister of Housing & Local Government, Malaysia
BUIiD-TIIEn-SEII :
The Way Forward 1
I
The Government has decided that the
Build-Then-Sell concept is to co-exist with
the existing Sell-On-Plan syslem, Much has
been said and written on the effects of this
decision on the Property and Construction industry
BACKGROUND & OBJECTIVE OF SEMINAR
Who should attend?
HJuse buyers, property investors, developers. real estale
professionals, financiers, architects. engineers, geomatic &
land surveyors, contractors, real estate agents, valuers.
quantity surveyors, lawyers, accountants, stakeholders,
insurance professionals. professional bodies, relevant
ministries. government Implementation agencies and
academic institutions,
National House Buyers Associ;;tion
Master Builders Association, Malaysia
Reat Estate &Housirtg Developers'
Association Malaysia
Pertuwhan Mal8ysi8
Association of Banks
The Royat InSI;tution of Chartered Surveyors
Construction Industry Development
Boord ICIDB)
The Institute of Buildillg Malaysia
The Institution of EJlgineers, M818ysi8
Pers8tuan Kontraktor Me1ayu, Malaysia
Supported by:
The Institution of Surveyors, Malaysia
.3rd Floor Bil/l<JUMO jUflmkvr. 64-66. Jalan 5214
46200 J8ya, S<!larqor Oarul
TeI603T9551/73 Fat 603-7%50253
'Neb '""",, ,sm org my
Points
Reg. Fee
Applied for CPD Points with the relevant profellional Boards
RM 248.00 Members of ISM and supporting organizations incluiive of
leminar materials, and lunch
RM 348.00 - All Others inciUlive of ieminar materials, refreihments and lunch
1
1
Closing Date: 4th May 2001
REG I ST RAT ION
................................. 1
NAME
COMPANY : _
H/PHONE: _
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'n<Timr"", "J S""TJ'tlr'". 1'"I"J";fl ..
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10I
1
TEL. NO.
FAX No. 1
,
IMPROVING THE DELIVERY SYSTEM ON THE PROCEDURES AND
PROCESSES AND
IMPLEMENTATION OF THE ONE STOP CENTRE FOR DEVELOPMENT
APPLICATIONS
By:
DATO' MOHO. FADZIL BIN HJ. MOHO KHIR
Director General
Federal Department of Town & Country Planning
(Peninsular Malaysia)
(Ministry of Housing & Local Government)
Jalan Cenderasari, 50646 Kuala Lumpur
No. Tel: 603-26989211, No. Fax: 603-26987371
No.
Abstract
1.0 Objective
CONTENTS
Items Page
1
2
2.0 BACKGROUND 2
3.0 ISSUES & PROBLEMS 3
4.0 CURRENT PRACTICE OF DEVELOPMENT APPLICATION 7
PROCESS
5.0 IMPROVING THE DELIVERY SYSTEM ON THE PROCEDURE 9
AND PROCESS AND IMPLEMENTATION OF THE ONE STOP
CENTRE FOR DEVELOPMENT APPLICATIONS
6.0 IMPLEMENTATION OF THE ONE STOP CENTRE TO PROCESS 14
LAND DEVELOPMENT APPLICATIONS
6.1
6.2
6.3
6.4
Function and Membership of the One Stop Committee
Function and Membership of the One Stop Centre
Secretariat
Procedures of the One Stop Centre Committee meetings
Inspectorate Team of the Ministry of Housing and Local
Government
14
15
15
18
7.0 CONCLUSION
List of Tables:
Table 1: Comparison of the Normal Processing Time for
Applications
List of Appendices
Appendix 1: The Mechanism for the simultaneous processing
of Build Then Sell (BTS) Concept, High Impact
and Government projects
Appendix 2: The Mechanism for Simultaneous Processing for
the Sell Then Build (STB) Concept
Appendix 3: Members of the One Stop Centre Committee
ii
20
IMPROVING THE DELIVERY SYSTEM ON THE PROCEDURES AND
PROCESSES AND
IMPLEMENTATION OF THE ONE STOP CENTRE FOR DEVELOPMENT
APPLICATIONS
By:
DATO' MOHO. FADZIL SIN HJ. MOHO KHIR
Director General
Federal Department of Town and Country Planning, Pninsular Malaysia
Jalan Cenderasari, 50646 Kuala lumpur
Tel: 603-26989211, Fax: 603-26987371
Abstract
The Ministry of Housing and Local Government (MOHLG), through the
Department of Town and Country Planning, has taken the initiative to improve
and re-engineer the whole process and procedure in treating development
applications that are currently practised. This effort to improve the delivery
system shall be an incentive to developers who have chosen to adopt the "Build
Then Sell U (BTS) Concept, and for the projects with high impact and foreign
investments as well as Government projects, so that approval can be given within
4 months. The approval for development applications, especially that concerning
town and country planning in this country is not only sUbject to the Town and
Country Planning Act 1976 (Act 172), but also other legislations such as the
National Land Code 1965 (Act 56), Street, Drainage and Building Act 1974 (Act
133), Local Government Act 1976 (Act 171) and the Uniform Building Bye-Laws
1984. Local Authorities (LA), are also guided by other mechanisms such as
Rules & Regulations, procedures, standards and guidelines, in the deveopment
control process. In outlining the details of the improvement in the delivery system
of the approval process for development applications, this paper will focus on the
mechanism, process and procedure for simultaneous approval of development
applications through the implementation of a one stop centre.
1.0 OBJECTIVE
The objective of this paper is to table a new approach that will be
implemented to improve the government delivery system particularly that
involving the process and procedure in the approvals of development
applications. This is in line with the Cabinet decision dated 21 st March
2007.
This paper will identify the issues and differences that exist in the process
and procedures of development applications currently in practice in the
country. A uniform and standardized system for an Local authorities in
Peninsular Malaysia shall be used to comply with the requirements of the
National Land Code 1965 (Act 56), Town and Country Planning Act 197
(Act 172), Street, Drainage and BUilding Act 1974 (Act 133), Local
Government Act 1976 (Act 171) and the Uniform BUilding Bye-Laws 1984.
2.0 BACKGROUND
The current practice of development plan approvals that involve land
development, planning, building and engineering is made separately and
sequentially, which consumes much time. The approach used in the
approval of land development that involve several government
departments and agencies also differ from state to state. Therefore the
government has directed that all agencies at federal, state and local levels
undertake steps to ensure that the service provided is cost effective, fast,
efficient and of quality besides being an incentive. Every government
agency has to continously improve to satisfy customer needs and offer
quality services.
Thus, a coordinated effort on the work processes that is more systematic
must be implemented. Therefore, cooperation amongst all involved is
pertinent to achieve the objectives as desired by the Right Honorable
Prime Minister. The Cabinet, at its meeting on the 7th June 2006 had
considered and agreed to the concept of HBuild Then Sell (BTS)", in which
amongst others, developers who adopt the BTS Concept shall be given
the incentive of fast track approvals for their development. State
Governments also have to act as facilitators and offer priority of this fast
track approvalS to participating developers. All development applications
have to be processed for approval within a specified period of not more
than 4 months from the date of submission.
To ensure that approvals for BTS, High Impact and Foreign investment
Projects as well as Government projects obtain approvals within the 4
monthS, the Ministry of Housing and Local Government (MHLG), has
developed a detailed process and procedure. This approach has been
tabled at several meetings involVing land administrators, the land offices,
2
technical departments and agencies so as to achieve a basic
understanding and agreement on the new process and procedures.
On the part of the government, the fast lane incentive for BTS has a two
pronged objective:
a. developers who choose this concept will be more competitive in the
housing market and the issue of abandoned projects will be a thing of
the past as buyers will purchase ready built houses, and
b. The decision is basically a re-engineering of the whole system of
process and procedures that is currently practiced, to ensure that
development plan application can be processed and decisions made
quickly and efficiently.
3.0 ISSUES AND PROBLEMS
The MHLG with several other departments undertook an examination of
the flow chart and work processes in all departments and agencies
involved in the approval of development projects. As a result, it was found
that approvals for any development proposal, from land matters, to layout
plan approval to building plans, can take up to more than a year. Some of
the reasons attributed to the lengthy approval process are:
i. The process for land matters in this country involves various agencies
and technical departments, at both federal and state levels. The
process also involves several legislation including the National Land
Code (NLC), Act 172, Act 171, Act 133 and several others.
ii. Based on existing practices, there are several shortcomings and
differences in terms of the process and procedures of land
development between state and local authorities. Some of these are:
States requiring that approval in principle be obtained first before
the application is considered by the local authority, and
There are also states which require that all applications are
processed and considered at state level. In such cases, the local
planning authority only make recommendations without following
the procedures under Act 172, such as referrirng to neighbouring
lot owners under section 21 (6) and 21 (7), nor the issuance of
written instructions under sub section 21 (3). The implications of
such actions may mean that the local authority can be taken to
court.
iii. there have been duplication of technical comments for planning
permission, building plan approval and land development applications;
3
iv. there are differing interpretations of the NLC and Act 172. This has
resulted in the different processes of planning and building plan
approvals and the development of land;
v. there is a lack of transparency in the processing of development
applications according to procedures of the law;
vi. There exists a definite process for development applications, in which
they are done in sequence under section 124, 124A and 2040 of the
NLC, in which each is submitted separately to the land office. On the
other hand, planning permission and building plan applications are also
submitted separately even though to the same authority.
4.0 CURRENT PRACTICES IN THE PROCESS OF DEVELOPMENT
APPLICATIONS
Currently, development proposals that involve planning permission, and
bUilding plan approvals, refers to specific legislations namely the NLC, Act
172, Act 171, Act 133 and the Uniform Building Bye-Laws. Although all
these legislation are adopted by all authorities, there still exist delays for
approval. As an example, the approval process for land conversion takes
up to between 3 to 6 months.
In the processing of applications there is not much diffiCUlty in giving
preliminary approvals by the Land Office and the Director of Lands and
Mines as they can easily refer to the available Structure and Local Plans.
The process of subdivision (under the jurisdiction of the State Lands and
Mines Department), takes an average time of 2 weeks to 4 months. As
layout plans are prepared by professional consultants, and the pre-
computation plans are prepared by qualified surveyors, it is therefore
possible to process sub-division plans within 2 weeks.
Applications for planning permission submitted to local authorities takes
about 3 months to be considered, and the process and procedures differ
between authorities. Besides delays at local authorities, other technical
departments also delay in their comments and review. Applications for
bUilding plan approvals takes up to between 45 days to 3 months. The
lengthy time taken to deliberate and process development applications has
resulted in many problems and losses to developers and investors.
Although all laws are adopted uniformly amongst all agencies, whether it
be the Land Office or Local Authorities, the issue of delays in development
approvals still exist. This is due to the different interpretations,
understanding, process and procedure amongst technical departments
4
and local authorities on the needs and requirements of the National Land
Code and the Town & Country Planning Act 1976 (Act 172). As examples:
i. The current practice of development plan process in Johore is divided
into 2 stages, that is, at the Approval in Principle stage, and the
Approval in Conversion and subdivision stage. For the second stage,
applicants can submit concurrently for conversion and subdivision or
surrender and re-alienation;
ii. In Penang, the Land Office will submit a recommendation letter to the
State Land and Mines Department for subdivision applications. . The
State Land and Mines Department will forward the application to the
State Land Committee before it is brought for consideration to the State
Executive Council. In the meantime, the Ad-hoc committee on land
conversion will process the application for conversion and subdivision.
iii. In Malacca, the process for conversion, subdivision amalgamation,
surrender and re-alienation also undergo two stages. The approval in
principle for land development is processed by the Committee on
Subdivision and land Conversion, whereas the Central Express
Commitee processes the approval for layout plans. The Committees
function as processing bodies and coordinates all land development
applications; and
iv. In Pahang, all views and comments on land conversion are
coordinated at the meetings of the Technical Departments
Coordination Committee which is chaired by the Director, State Land
and Mines Department. All comments are coordinated and forwarded
to the State Land Development Committee before it is brought to the
State Executive Council for approval.
It has been found that the time to process planning permission and
building plans differ between local authorities. Examples of the normal
procedural time for processing is shown in table 1.
Table 1 : Comparison of the normal processing time for applications
Normal Processin< Time (days)
Local Authority (LA) Planning Building Plan
Permission Applications
Ampang Jaya MuniCipal
Council
90 30 to 60
PetalinQ Jaya City Hall
Kajang MuniCipal Council
Subang Jaya MuniCipal Council 60 30 to 45
Kuala Lumpur City Hall 45-120 30 - 120
In addition, there are cases whereby technical comments are repeated,
that is during the planning permission stage and the bUilding plan stage..
5
As an example, the comments given by the State Department of Lands
and Mines during the planning permission stage is repeated during the
building plan approval stage. This repetition also happens when obtaining
comments from technical departrl}ents.
6
5.0 IMPROVEMENT ON THE DELIVERY SYSTEM IN THE PROCESS AND
PROCEDURES AND IMPLEMENTATION OF THE ONE STOP CENTRE
The proposed improvement incorporates the requirements of the National
Land Code (for section 124A and 2040) and Act 172 (Section 19), and Act
133 (section 70A). This Shall act as an incentive that Will be given to
developers who choose the BTS Concept. Applications for high impact
projects, or projects invOlving large foreign investments and projects by
government that are referred to Local Authorities shall be processed
through the fast lane within 4 months.
Besides that, development proposals involving Sell Then Build (STB) also
need to be expedited in line with the Government's objectives of giving
excellent service to the pUblic. Applications involving this concept shall be
approved within 6 months from the date of submission.
FOr purposes of increasing the effectiveness of the delivery system, this
re-engineered approach shall be adopted by all Local Authorities (LA). For
LAs that do not have the professional services of a town planner, the
State Department of Town and Country Planning need to assist in the
process and make recommendations on the application. In order to avoid
confusion, it is suggested that this new approach be implemented
simultaneously throughout the country and the former practice be set
aside.
To reduce amendments on the plans submitted, applicants/developers
need to undertake preliminary discussions With LAs and relevant technical
departments and agencies, as well as abide by current government
policies, guidelines and planning standards available.
Under the BTS concept, simultaneous applications that involves section
124A and 2040 NLC, shall require submission to the Secretariat of the
One Stop Centre (OSC) at the Local Authority, that is:-
i. simultaneous application for subdivision and conversion under
124A, and surrender and re-alienation under section 2040 NLC;
ii. application for planning permission, and
iii. Application for building plan approval.
Approval for planning permission needs to be obtained before a deciSion
on application for subdivision and conversion, and surrender and re-
alienation can be given. This is in line with the provisions of sub section
136 (1)(c)(i) and sub-section 20"1C(1)(a) NLC that requires prior approval
for planning from the Local Authority.
7
For applications under 124A and 2040 NLC that is accompanied with pre-
computation plans, technical inputs from technical departments and
agencies are not required as this is considered a duplication. This is
because the layout plan that is submitted during planning permission
require technical inputs and comments from government departments and
agencies first before the pre-computation plans.
Upon receiving any application, the Secretariat of the OSC shall check all
documents according to the prescribed checklist. When all documents are
in order, the Secretariat shall distribute the application to relevant
departments for processing:
application under section 124A and 2040 to the Land Office:
application for planning permission to the divison/department of Town
and Country Planning at local Authority; and
Application for building plan to the divisin/department of Building at the
Local Authority.
The OSC Secretariat shall also distribute all three applications to the
technical departments/agencies for comments and views.
At the same time, after receiving the application, the land office can
proceed to process, although approval will be based on the status of the
planning permission. This is to expediate and improve on the effectiveness
of the delivery system of the work process and procedures. The process
and procedures for simultaneous applications shall be as follows:
A. Application for subdivision and conversion will be as follows:
i. Check on Form 70, receipt of payment, *pre-computation plan,
agreement, if under different ownership and power of attorney
(if available);
ii. Land Administrator checks on land status (caveat, conditions
of title, expressed conditions, and others);
iii. Land Administrator records receipt of application into the
ownership document;
iv. the settlement officer prepares land report;
v. charting of application by draughtsman; and
vi. Land Administrator prepares review to the OSC Secretariat.
*/f applicant submits a pre-computation plan for simultaneous application.
8
The time frame for processing the application shall not exceed 25 days.
B. Application for Surrender and Re-alienation will be as follows:
i. Check on Form 120, receipt of payment, *pre-computation
plan that will show details of the units to be surrendered,
agreement letter if under different ownership, Letter of
Oath,and power of attorney (if available);
ii. Land Administrator checks on land status (caveat, conditions of title,
expressed conditions, and others);
iii. Land Administrator records receipt of application into the
ownership document;
iv. the settlement officer prepares land report;
v. charting of application by draughtsman;
vi. Land Administrator prepares review to the OSC Secretariat.
*/f applicant submits a pre-computation plan for simultaneous application.
The time frame for processing the application Shall not exceed 25 days.
C. Application for Planning Permission, inclUding landscape and
engineering Istructural plans, the town planning officer at the Local
authority shall undertake the following process and procedure:
i. receive application;
ii. Check on fee payment, the Development Proposal Report
(LCP), permission for tight of way, endorsed plan (layout
plan, landscape plan, earthwork plan, proposed name for the
township, list of adjoining lot owners thathas been endorsed
by the Land Administrator (if neded) and matters listed in
Schedule II, Rules and Regulations for Development Control
(General);
iii. Open File;
iv. refer to development plans and planning guidelines;
9
v. send notices to neighbouring lot owners I hearing of
objections (if no local plans available);
vi. Refer to the State Planning Committee (SPC) and the
National Physical Planning Council (NPPC) (when required);
vii. receive comments from technical departments and
coordinate the conditions;
viii. prepare written instructions to the applicant and ensure that
the applicant fulfill conditions within 7 days;
ix. Prepare working paper for the esc secretariat.
The Planning department at the Local Authority must refer to the
department of engineering for engineering plans, and the department of
Landscape for landscape plans, for coordination purposes. The director of
Planning shall table the working paper at the esc Committee meetings.
The recommended schedule is not more than 50 days. For applications
within areas with a Local Plan. the processing time shall not be more than
25 days.
D. Applications for Building Plan approval require the officer at the
BUilding Department to undertake the following process and
procedures:
i. Receive application;
ii. Check Form A, submission fees, endorsed plan ( building plan.
infrastructure plan. sanitation plan, Structural drawings. Plan
for road names);
iii. check building plans and other related plans;
iv. receive comments and feedback from technical departments
and agencies and coordinate comments;
v. prepare written instructions to applicant ensure applicant fulfill
conditions. and
vi. . Prepare report to the esc secretariat.
The Director of the Building Uepartment of the Local Authority shall table
the application to the esc Committee meetings.
10
Next, the Secretariat of the OSC shall compile and coordinate all reports
and arrange for the meetings, as well as distribute the reports to the
members of the OSC Committee. In cases where technical departments
could not provide feedback and comments within the time frame set
without valid reasons, the esc Committee shall consider and approve the
application. For applications that have submitted the pre-computation
plans initially, and there are differences between the pre-computation
plans and the detail layout plans, the secretariat shall request the applicant
to make the necessary amendments to the pre-computation plans before
tabling the application at the OSC Committee meeting.
For areas that has no local plan, all technical departments I agencies shall
be given 50 days to process the application. This is because the LA has
to send out notices and receive objections from neighbouring land ownerS
within 21 days. SUbsequently, the LA has to hold a hearing within 14 days
of receiving the objections. ThiS is an improvement to the proviSion of sub-
section 21 (7) Act 172 from 30 days to 14 days.
The OSC Committee shall consider and decide on the application for
planning permission and building plans as well as make recommendations
on the pre-computation plans, and simultaneous applications for sub-
division and conversion under 124A, and surrender and re-alienation
under 2040 NLC, in line with the provisions of sUb-paragraph 136(1 )(c)(i)
and paragraph 2040(1 )(d).
The Land Administrator shall prepare the working paper on
recommendations on Whether to approve or refuse applications, to the
Director of Land and Mines who will then prepare a working paper to be
tabled to the State executive Council. The decision has to be reverted to
the Land Administrator in order to determine the premiums. The esc
secretariat is responsible to present the decision of the application to the
Full Council of the Local Authority for endorsement.
It is suggested that the Full Council of the Local Authority delegates the
powers of approval to the OSC Committee, on planning permission and
bUilding plan approvals so as to effectively implement the delivery system
as well as reduce the time taken to process plans. However, the OSC
secretariat shall still prepare reports of the decisions of the OSC
Committeee on applications for planning permission, building plans and
decisions from the Land Administrator, to the Full Council of the Local
Authority.
The processing of simultaneous applications under the BTS, High impact
projects and Foreign Investments as well as Government projects is
suggested to be undertaken within a time frame of 92 days (3 months 2
days). If the application falls within an area with a local plan, the time taken
to process the application should be within 67 days (2 months and 7
days). Please refer Appendix 1.
11
The Cabinet, has decided, amongst others, that the process and
procedures for the two concepts of BTS and STB be undertaken
simultaneously until further research is undertaken, which is after 2 years
this new approach is implemented. As it is the objective of the
Government to expediate the delivery system, the MOHLG suggests that
the Simultaneous Application for Land Development, Planning Permission
and Building Plan for the Sell Then Build Concept (STB) also be given
attention and approval given within a time frame of 6 months.
For developers that still choose the STB concept, the process and
procedure for applications are the same. However, the time frame will be
a bit longer compared with the BTS concept. This approach will involve
the following time frame:
i. application for conversion 48 days;
ii. application for planning permission 84 days;
iii. application for building plan approval 45 days;
iv. comments from technical departments 40 days; and
v. Giving enough time to the OSC secretariat to compile all
comments and prepare working paper.
To process applications under the STB concept that involve land matters
(simultaneous subdivision and conversion and surrender and re-
alienation), planning permission and building plan approval, the time frame
shall not exceed 142 days (4 months and 22 days). Refer Appendix 2.
In this new approach of processing development proposals, the
cooperation of all departments and agencies in making decisions is vital.
In the event that technical departments and agencies cannot provide
cooments and feedback within the stipulated time frame without a valid
reason. then it is suggested that the OSC Committee be given the powers
to consider the application and henceforth make the decision.
Intrinsic to the improvement of the delivery system is the empowerment of
the OSC Committee. This Committee has the powers to consider and
make decisions on applications for planning permission, building plans, as
well as inform of planning approvals for simultaneous application for sub-
division and conversion. and surrender and re-alienation to the Land
Administrator.
As the heart of the new system lies with the OSC, it is suggested that the
the manpower needs be strengthened and added according to needs.
Officers involved at all levels will have to be adequately trained so as to
fully understand and comprehend the new process and procedures.
Extensive information need to be made available to all customers,
particularly consultants and developers.
12
6.0 IMPLEMENTATION OF THE ONE STOP CENTRE TO PROCESS
DEVELOPMENT PROPOSALS
6.1 Implementation of the One Stop Centre (OSC)
The approach under the concept of aTS and STa involves the
establishment of the One Stop centre (OSC) at the Local Authority. This
OSC has been given expanded functions from the processing of building
plans and Certificate of Fitness as in their previous scope, to the
processing of land matters, planning permission and building plans. The
issuance of the Certificate of Fitness shall be replaced by the Certificate of
Completion and Compliance (CCC) that will be under the responsibility of
the certified professional person. However, for old cases that still have not
been issued the Certificate of Fitness, the responsibility still lies With this
One Stop Centre.
The establishment Of the OSC is to reduce the normal time for processing
of development applications through simultaeous submission and
immediately increase the efficiency of the government delivery system of
land development at Local Authroity level. The OSC at the local authority
shall have the following role:
i. Coordinate, control and monitor simultaneous applications that
involves land matters (simultaneous subdivision and conversion
and surrender and re-alienation), planning permission and building
plan from the applicant to the Land Office and Local Authority as
well as technical departments and agencies as prescribed;
ii. examine the status of development applications and issuance of
approval decisions to the applicant;
iii. Inform the decision on approval for planning permission and
building plan as well as land matters to the Land Administrator and
Full Council of the Local Authority;
iv. Prepare status report of the application;
v. Examine and analyse the issues of applications received and make
recommendations for improvements on the development proposals;
vi. Determine plans of action to address issues.
13
6.2 Functions and membership of the OSC Committee
The functions of the OSC Committee are as follows:
i. consider and make decision on the planning permission application,
bUilding plans and other related plans (power is delegated by the
Full Council of Local Authority). and
ii. Endorse and inform the decision on the application under provisions
of section 124A and 240D NLC and in line with the provisions of
sub paragraphs 136(c)(i) and 204D(1)(d).
To ensure smooth implementation of this new approach of the OSC, a
committee shall be formed and chaired by the Mayor, or President of the
Municipal Council, or President of the District Council. The members are
as in Appendix 3.
6.3 Functions and membership of local One Stop Centre Secretariat
The secretariat of the OSC shall consist of the Town Planner in the
Department of Town Planning at the Local Authority. There are 4
categories of organizational structure for the OSC secretariat, which are:
Category 1: The proposed organization structure for the OSC secretariat
for 14 Local Authorities with City Hall I Municipal status will be as such:
i. a town planner at J48;
ii. a town planner at J41 ;
iii. an assistant town planner at J 29;
iv. a technical assistant (architecture) J29;
v. a technical assistant (engineer) J29;
vi. a town planning technician J 17;
vii. an architectural technician J17;
viii. a engineering technician J17;
ix. an administrative assistant N17 and;
x. a general worker N1.
14
Category 2: For 21 Local Authorities with City Hall I Municipal status, the
orgcihization structure shall be as follows:
i. a Town Planner J44;
ii. a Town Planner J41;
iii. a technical assistant (architecture) J29;
iv. a technical assistant (engineer) J29;
v. a Town Planning Technician J17;
vi. an administrative assistant N17, and
vii. a general worker N1.
Category 3: For 25 local authorities with district status, the organization
structure shall be as follows:
i. A Town Planner J41 ;
ii. an assistant town planner at J 29;
iii. a technical assistant (architecture) J29;
iv. a technical assistant (engineer) J29;
v. an administrative assistant N17, and
vi. a general worker N1.
Category 4: For 32 local authorities with district status, the organization
structure shall be as follows:
i. A Town Planner J41;
ii. an assistant town planner at J 29; and
iii. an administrative assistant N17.
15
The functions of the Secretariat of the One Stop Centre shall be as follows:
i. receive applications of development proposals covering planning
permission, building plan, earth works plan and landscape plans,
from applicants;
ii. examine if the proposal received has met with all requirements and
conditions set by the Local Authority;
iii. Undertake to distribute the documents of the proposal to all
technical departments and agencies for comments and reviews
(Secretariat shall issue an acknowledgement slip if applicants want
to distribute the documents themselves;)
iv. monitor the development applications that has been distributed to
technical departments and agencies;
v. Inform the One Stop Centre Committee on the applications received;
vi. Obtain feedback from the technical departments and agencies if
there are issues and problems on the proposals;
vii. prepare and forward the recommendation paper on the application
together with the pre-computation plan, for the approval of the One
Stop Centre Committee;
viii. Distribute the decision of the One Stop Centre Committee on the
application to the Land Office that consist of:-
a. application for land development under section 124A and
2040 National Land Code;
b. application for Planning Permission;
c. application for building plan approval;
ix. act as secretariat that is responsible for determining the meeting
dates and ensure that meetings occur every two weeks, prepare the
minutes of meetings and feedback, for distribution to all members of
the One Stop Centre Committee;
x. prepare the working paper on the decision of the application to be
tabled at the Local Authority's Full Council meeting;
xi. Send the official decision to the applicant.
16
6.4 Proceedings of the Meetings of the One Stop Committee
To ensure a smooth process, every development application submitted by
consultants on behalf of the developers to the one stop centre, must
contain complete information and documents in accordance to the
prescribed checklist. The OSC Secretariat will only register applications
that are complete. Consequently the Secretariat will take immediate
action to distribute the simultaneous application regarding land matters to
the Land Office, planning permission to the Department of Planning of the
Local Authority, and building plans to the Department of Building at the
Local Authority. The Secretariat shall distribute all three applications to
technical departments and agencies for comments and views. The
Technical Departments shall prepare and submit their recommendations
to the asc Secretariat.
The format for technical departments' reviews and comments has been
prescribed in the Guidelines. To ensure that decisions are made within
the least amount of time as prescribed, it is sugested that the One Stop
Centre Committee meetings be held twice (2 times) a month. The
Secretariat shall pre-determine the dates of the meetings to enable
developers to present their proposal should they want to. To ensure the
smooth proceedings of the meeting, the checklist of technical
requirements shall be prepared for the Chairman and committee members.
The One Stop Centre Committee shall be informed from time to time the
numbers and status of applications that has been received by the
secretariat, as well as the scheduled dates for consideration.
The One Stop Centre Committee shall make the decision on the planning
permission and bUilding plans as well as other plans. This Committee shall
also make recommendations on the land development applications to the
Director of Land and Mines. The Secretariat shall prepare the
recommendation paper based on the decision of the One Stop Centre
Committee. This recommendation paper shall be forwarded to the Full
Council Meeting of the Local Authority for endorsement of the planning
permission and bUilding plan approval.
The expansion of the functions of the One Stop Centre here has altered
the current practice in the process and procedures of approval of
development applications. Through this new procedure, the functions of
the Committee on Planning and Development at Local Authority level is
now defunct. The membership consists of professionals from technical
departments and agenCies, and membership of councillors is limited to
only 4, which is only to provide inputs on the political and social impact of
the development application.
17
The establishment of the One Stop Centre with the suggested
membership of technical officers from government departments and
agencies and only 4 local councillors is not ultra vires the provision of
section 28, Local Government Act 1976 (Act 171).
semasa
khas,
lis dan
pihak
. apa-apa
pat pihak
gan cara suatu
mana-mana
tut melainkan kuasa
mjaman, dan boleh
kuasa itu." (Pelikan
To be copied from the Act itself!!/
6.5 Inspectorate Team at Ministry of Housing and Local Government
An Inspectorate team at the Ministry of Housing and Local Government
through the Department of Town and Country Planning and the
Department of Local Government needs to be established, to continously
monitor the implementation of the One Stop Centre at Local Authority level.
The team will have the following functions:
i. to receive feedback from the public and those involved and make
assessments with the objective of further improvement wherever
needed;
ii. monitor the implementation of current local policies. including the
implementation of the one stop centre at local authority levels;
iii. provide advice and technical assistance including make visits to
local authorities that need help in the implmentation of the one stop
centre;
iv. Receive feedback and reports on the implementation of the one
stop centre every 3 months from local authorities, and
v. Examine the effectiveness of the implementation and suggest
further improvement on the one stop centre.
The effectiveness of the one stop centre in development plan approval
process shall be monitored continously. Close examination on the
implementation shall be undertaken initially, so that any issues can be
18
addressed immediately to ensure that the objectives of the one stop centre
can be achieved.
7.0 CONCLUSION
Improvement to the procedures and process and the implementation of the
One Stop Centre (OSC) for Development Applications is pertinent and
timely. This is to ensure a delivery system by Government that is
comprehensive , fast and uniform that is adopted by all State
Governments and Local Authorities for any land development. It will at
once meet up with the needs of the community and ensure the nation's
aspirations towards Vision 2020.
This improvement meets up with the Cabinet decision and the wishes of
the Prime Minister who wants the procedures for development approvals
to be expedited and the idiosyncracies of bureaucracy at all levels are
reduced, in order to increase the country's competitiveness to attract
foreign investments to Malaysia.
W.dyah Senikl Lee Yoke San
F:\persidangan KPKT 13 apnkertas ketja sistem pehyari"lpaian.ctoc
19
Chairman
Secretary
Members
APPENDIX 3
MEMBERS OF THE ONE STOP COMMITTEE
City Mayor I President of Local Authority
Town Planning Officer of Local Authroity
State Town and Country Planning Department
State Land and Mines Department I District Land Office
Public Works Department
Department of Irrigation and Drainage
Department of Environment
Water Supply Department*
Tenaga Nasional Berhad
Deaprtment of Fire and Rescue Services Malaysia*
Telekom Malaysia Berhad*
Department of Sewerage Services
Department of Mineral and Geoscience
Department of Landscape, Local Authority
Department of Health, Local Authority
Building Department, Local Authority
Engineering Department, Local Authority*
4 local Councillors
Other related technical departments shall be invited from
time to time depending on needs.
Nota * Technical Departments will comment on the Building Plans
Note
For matters of land, the Department of Land and Mines shall provide
comments and the Local Authority shall confirm the comments.
- Co nsurtants/Applicants shall be invited to prOVide more information I
explanantions if and when required.
APPENDIX 1
SIMULTANEOUS APPLICATION MECHANISM FOR ALL PROPERT DEVELOPMENT PROJECTS WITH
COMPLETE DOCUMENTATION UPON APPLICATION
Complete?
( 50 days) (25
d ~ y . )
If Local PJan exfh
TECHNICAL
DEPARTMENTS
JPBD
PIO/PIG
JKR
JPS
TNB
JAS
JPP
PBA
JMG
JBP
Jab.
rertanian
Jab.
Penilaian
Other
technical
departments
( 50 days) (25doys')
If Local Plan exIst
Prepare recommendation
paper to OSC secretariat
LOCAL AUTHORITY BUILDING
Building Pion oppllcation
(section 70 Act 133-Streets.
drainage & Building Act 1974
JPN
Secretariat
Checking 01 documents
(1 day)
Refe< to JPN/MPFN' (if necessary
and subject to MPFN meeting
..Jawatdnkuaso Peroncong
Negeri/Mdjlis Pemncong FtZikol Negoro
OSC SECRETARIAT
(Compilation/ Sorting recommendation Paper
(5 harl)
Application considered
withdrawn if conditions
are not met within 7
days
Written Notice
to adjacent
landowner
( 50 days) (25 days')
if locOI pions exist
Request Additic:mcll
Documents/Information
Simultaneous
application for land
conversion and
subdivision (124A) or
surrender and
alienation (204D)
OSC SeCre toriat forwards Planning
Permission
To Land Office for processing the Land
Development Application
PT prepares recommendation
papers to the PTG
(10 horl)
OSC COMMITTEE MEETING (DECISION)
(1 day)
. OSC Secretariat will refer
decision on land development
application to the Land Office
for payment.
State Exco Meeting
(14 horl)
OSC SECRETAIUAT Land Office
(5 doys)
Decision
osc Secretariat compile recommendation papers
to forward to the LoCal Authority full Council
Meeting .
(5 days)
LOCAL AUTHORITY FULL COUNCiL MEETING
(ENDORSEMENT)
(1 day)
The process on applications will take at least 92 days (3 months and 2 days)
APPENDIX 2
SIMULTANEOUS APPLICATION MECHANISM FOR THE BUILD THEN SELL (8TS) CONCEPT
ONE S1OI' CENTRE (OSC) SECUTARIAT I
,.,
Checking of Documents I
I
(2 days)
Request Additional
documents/information ------<6Complete?
1-..------------' No TYes
+ +
LOCAL AUTHORITY PLANNING DEPARTMENT
...
Planning Permission Application (subsection 21(1),
Act 172- Town & Country Planning Ad 1976
OpenRle
I
_I
I

TECHNICA
DEPARTMEN
(45 days)
Prepare recommendation
poper to OSC secretariat
Receive Comments and I
synchronize conditions
Jab. I
- Penilaia"
I
Checking of Building I Other
Plam technical
departmenl
LOCAL AUTHORITY BUILDING
,P...
Building Plan application
(section 70 Act 133-Streets,
drainage & iuildlng Ad 1974
JPBD
PTD/PTG
JKR
r
-----;:=... JPS
TN8
Check I JAS
I
Document
JPP
PBA
/Additionol JMG
Information Yes JBP
I I
Jab.
Registration/ Pertanlan
Open File
I
Advice I
bvMPFN
No
Written instruction to
appicant ta fulfiN
conditions
yes JPN I
Secretona

Receive Comments ond

synchronize conditions
Refer to JPN/MPFN if necessary
and subject ta MPFN meetings
JowotonkuDSO Peroncang
Negeri/MojIis Peroncong FizikoJ
..
If No local r-__ _,
PIOn
Decision
Refer to Development PlOm
ond Guidelines
Application considered ...,_
withdrawn it conditions
ore not met within 7
day>
Written notice
to odjacent
owners
Yes

I Bontahon F
1 Objection
I Hearing
land AdminstratarfPT) I
f
LAND OFFICE
Charting, Memorial
Endorsement and
Preparing land report
Forward comments to I
OSC secretariat
PT checks and recommends I
appHcation immediately
SIMULTANEOUS
APPPILCAnON FOR LAND
CONVERSION (124-) OR
SURRENDER AND RE-
ALlENAnON (24OD)
(48 days)
Prepare recommendation
paper ta OSC Secretariat
( 84don) (33 days)
If Local PIon Available
OSC Secretariat forwards Planning
Permission
To Land OffICe for processing the Land
Development Application
PT prepares recQmmendation
papers to the PTG
(10 days)
OSC SECRETARIAT
(Compilation/ Sorting recommendation Paper
(5 hori)
OSC COMMITTEE MEETING (DECISION)
(1 hari)
osc Secretariat will refer
decision on land development
application to the Land Office
for payment.
!
State Meeti"g
(14 hod)
1
L.. o_e_c_I_Sio_"__,;.,.._--'1-
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to forward to the Local Authority Full Council
Meeting
'I; rl,.,vel
LOCAL AUTHORITY FULL COUNCIL MEETING
(ENDORSEMENT)
(1 day)
BUILD-IHEN-SELL:lhB Way Forward
11
th
May 2007
Matrade Hall (Level 3), Menara Matrade
PAPER 3
TIME: 11.00A.M
TOPIC: "MAKING 10:90 WORK"
SPEAKER: YBHG. BRIG GEN DATO' GOH SENG TOH
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5
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"A wrong thing when done over a period 0140
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http:l'-.hba.org.my Thursday. May 10. 2007
LEGAL IMPLICATIONS OF THE BTS
SYSTEM AND 10:90 CONCEPT
The IIlSIituUon ,I S"'Il)'" M,lll)sia
,
11 MAY 2007
--,
, PROF SALLEH BUANG
SAGE Business Services
A QUICK REMINDER
PRIMARY OBJECTIVE OF HDA 1966
- To protect purchasers
HDA ALSO FAVOURS THE
DEVELOPER
- Provisions for extension
- Water and electricity
- Limit on liability towards purchasers
2
SALLEH BUANG
PRIMARY OBJECTIVE OF THE LAW
3
TO PROTECT PURCHASERS
- SEA Housing Corp v. Lee Poh Chao
[1982] 2 MLJ 31 (house completed 5
months after due date; whether
developer can rely on exemption
clause; held, parties cannot contract
out of the Act)
I
':::,
SALLEH BUANG
4
THE ACT ALSO FAVOURS DEVELOPERS
PROVISION FOR EXTENSION - Reg 11 (3)
- Developer can apply to Controller to "waive or modify" any
provision of the SPA
- Controller must be satisfied that "owing to special
circumstances or hardship or necessity", compliance with
the SPA "is impracticable or unnecessary"
- Controller can issue certificate in writing grant the request
- The application cannot be made after period stipulated for
handing over of vacant possession I :
SALLEH BUANG
THE ACT ALSO FAVOURS DEVELOPERS
SALLEH BUANG 5
CONNECTION OF WATER AND
ELECTRICITY
Until the 1989 Regulations were amended in
1994 (w.eJ. 1 August 1994), there were
several conflicting decisions -
- Some favouring purchasers (water and
electricity must be flowing when developer
hands over vacant possession)
Others favouring developers (no such
obligations)
\
WATER AND ELECTRICITY SUPPLY (cont'd)
6
After the 1994 amendment, the developer is
only required to ensure that water and
electricity supply is "ready for connection";
this has been defined to mean -
- Water and electricity fittings have been
installed
Fittings have been tested by the appropriate
authority
Supply is available for tapping into individual
homes.
. -
, \
SALLEH BUANG

l . ~

-.
..
,

LIMIT ON DEVELOPER'S LIABILITY

Developer only obliged to pay liquidated
damages at 10% pa of the purchase price
Purchaser cannot sue for actual loss and
expense - Limmewah Development Sdn Bhd
v. Dr. Jasbir Singh [1993] 2 AMR 1263 (date of
completion scheduled 25 August 1981; actual
completion date January 1985; purchaser
claimed liquidated damages for delay, as well as
a further claim of RM6,000 (travelling back twice
to Malaysia) and damages Tor pain, anxiety,
distress and humiliation.
Held, claim for liquidated damages allowed; other
claims rejected.
7
SALLEH BUANG
EXISTING SELL THEN BUILD (STB) SYSTEM
8
Two standard SPAs
- Schedule G - houses on firm ground
- Schedule H - highrise buildings
Section 7A(9): no obligation by developer to maintain
HD Account if BTS system implemented
Some developers are now willing to give extended
* warranty
SP Setia 18+18 months
- SOB 36 months
- TH Properties 5 years
This warranty is meaningless if the project is later
abandoned.
t
...............
se laHOMES.COm
. ---
sel13HOMrS.com
SALLEH BUANG
9
WHYBTS?
JUST ONE CASE AMONGST THOUSANDS
150 buyers of a low-cost housing project in Slim River - still waiting for
their houses after 14 years. [NST, May 18, 2001].
Buyers (estate workers and government servants) had paid more than
RM2 million to the developer of Bandar Baru Slim in 1987; project
abandoned a year later; efforts to revive the project in 1990 (an
injection of RM1.41 million from Bank N e ~ a r a ' s special fund) failed due
to problems between the developer and financier.
Poject auctioned off in 1993 without the knowledge of the buyers and
the Housing and Local Government Ministry. The new developer sold
the houses at more than RM60,000 to new buyers.
SALLEH BUANG
10
WHY BTS?
"Rumah tak siap 20 tahun" (Harian Metro, 18 April 2007) -
Abu Seman's Story; Taman Kotawira Taiping Perak.
47 buyers of Taman Kencana Ampang - waited 10 years
for their homes; in 2000, the Official Receiver took over the
project; since then, nothing.
"Dream Home Nightmare" (Singapore Sunday Times, April 1,
2007) - 95 Singapore retirees purchased expensive homes
in Taman Permata, Johor Bahru; properties auctioned off
by bridging financier.
In 2004 - 227 housing projects abandoned; 75,356 houses,
worth RM7 billion (Source: HBA)
64% (168 out of 261 projects) abandoned in West Malaysian
since 1990 have NOT been revived.
SALLEH BUANG
11
WHY BTS?
"Not every project can be rehabilitated"
(Housing Ministry)
"The Tribunal cannot help in cases where
housing projects have been abandoned"
(Utusan Malaysia).
A Bukit Mertajam developer filed a RM50m
suit against his purchasers who
demonstrated, claiming that the project has
been abandoned (Dec 2005).
SALLEH BUANG
WHY BTS? HBA'S VIEW
INEQUITIES IN THE EXISTING STB SYSTEM:
Vacant possession given although CF not applied for /
construction work, including amenities, not
completed;
Long delay obtaining CF after delivery of vacant
possession;
Buyers have to chase developers to make good on
their breaches, rectify defects long after the delivery of
vacant possession;
The present system allows developers "to take risks
with purchasers' money". In other sectors, business
people take risks with their own money.
12
SALLEH BUANG
13
WHY BTS?
Many Malaysians thought they are
buying their dream homes. What they
actually get is a living nightmare.
Many Malaysians thought they are
buying properties. What they finally
get are mounting debts and a lot of
heartache.
SALLEH BUANG
14
BTS EARLIER HISTORY
Housing Minister Ting Chew Peh first raised
it in 1994
Admitted that "BTS will enable purchasers to
know what they are buying"
But gave 3 reasons why the proposal was
rejected -
System not viable
Developer had to obtain higher bridging
finance
- Progress of construction work may be
adversely affected
SALLEH BUANG
BTS MOST RECENT HISTORY
"I think it is not right to pay money
first, before you get your house ... if
they (developers) don't get to sell l
all their houses, the money won't
be enough for them to build. What
will happen to those who have paid
up?" [Datuk Seri Abdullah Ahmad
Badawi, May 2004].
15 SALLEH BUANG
CABINET DECISION ON BTS
"The Cabinet has to consider 3
key factors before giving the BTS
the green light" - Ong Ka Ting,
NST 27 May 2006
The 3 factors
Availability of affordable housing will
not be affected
- Provide better protection for house
buyers
- Will not hamper growth of the
housing industry
16
SALLEH BUANG
FORMALAPPROVALOFBTSSYSTEM
Government approval "in
principle" - June 22, 2006
Subject to review in 2
years (June 2008)
Old system (Sell then
Build) still in force.
17
SALLEH BUANG
18
TWO FORMS OF BTS
Complete BTS 0: 100
- Developer sells house, complete with eee
- No down payment, no progress payment
Partial BTS 10:90 Variant
- Parties sign SPA: purchaser pays 10% deposit
- Purchaser pays balance upon completion, eee
issued.
SALLEH BUANG
19
BERNAMA REPORT 13 DEC 2006
"The government has yet to set the launching date of the build-
and-sell concept as many developers still do not have the
financial capability to carry out such projects."
"If the concept was implemented hastily, it could jeopardise
housing development, especially in the urban areas. We
encourage the concept to run parallel to the conventional
concept," Ong Ka Ting, winding up the debate on 2006
Amendment Bill in the Dewan Rakyat.
SALLEH BUANG
ALTERNATIVE SYSTEMS
[Consumer.com.my]
, ...
. ( OJ1j. 1111'
,
20
Sell then build system "only practised in this
region" (Malaysia, Indonesia, Vietnam).
China, Hong Kong, Singapore, Australia
"adopt something in between".
- China, after 2/3
rd
of structural work completed
- Hong Kong, 20 months before completion date
- Australia, 10% held by developer's solicitors in
trust; 90% after completion, titles, CFO
SALLEH BUANG
21

BTS I ABANDONED PROJECTS:

HBA'S VIEW
Not true that BTS will totally prevent projects from being
abandoned
Many reasons for abandoned projects - financial problems,
mismanagement
Whether STB or BTS - future housing projects "will continue to
face the possibilities of being abandoned"
But under BTS, buyers will not be dragged into "the legal and
financial quagmire if the project fails"; they will be "insulated
from the business risks of developers and financial institutions".
Under BTS, developers will "exercise more responsibility", to
avoid disputes on quality when payment is due.
SALLEH BUANG
22
HOUSING INDUSTRY'S EARLIER VIEW ~
ON BTS Rf::HD:\
House prices will go up between 30% and
50%; housing supply will go down by 60"
(REHDA President, Datuk Jeffery Ng, Utusan
Malaysia 24/9/2005).
SALLEH BUANG
23
HOUSING INDUSTRY'S EARLIER VIEW:
IT WOULD BE A FAILURE, A DISASTER
"... The build-and-sell concept based on the Australian model of
10/90 would be a failure if not a disaster if introduced in
Malaysia. The 10/90 system based on the Australian model is
regulated under S9AA of the Sale of Land Act 1962 of the State
of Victoria...
From the developer's perspective, this model would only
compound its problem, notwithstanding that it still has to comply
with housing laws and state government policies on Bumiputera
ownership, mandatory laws on low-cost housing and
infrastructural requirements enforced by local councils. [NST 29
SEPT 2005]
SALLEH BUANG
24
HOUSING INDUSTRY'S EARLIER VIEW:
IT WOULD NOT WORK
"In short, such a concept would not be workable in the
Malaysian environment where procedural and
government policies differ extensively from the
Australian model. "
"The 10/90 variant model as practised in Australia is
successful because of the absence of bureaucracy
and the efficient mechanism in place for submission
and approval of building plans." [NST 29 SEPT 2005]
SALLEH BUANG
25
HOUSING INDUSTRY'S EARLIER VIEW:
OTHER CONDITIONS MUST BE IN PLACE
''The ministry must first ask itself whether it can dismantle the
government and state policies of low-cost housing and
mandatory Bumiputera allocation. Can it promote an efficient
mechanism to reduce bureaucracy in the submission and
approval of building plans?
If the answer is no, then the 10/90 model is not a workable
option for our building industry. If there is an attempt to
introduce the Australian 10/90 model, it is imperative that all
other conditions be in place beforehand." [NST 29 SEPT 2005]
SALLEH BUANG
1__-::::::==
26
HOUSING INDUSTRY'S EARLIER VIEW:
WHY IT WON'T WORK
"Under the 10/90 model, purchasers pay a down-payment of 10
per cent ... and the deposit is placed in an escrow trust account.
The remaining 90 per cent ... becomes payable on delivery of
vacant possession of the completed house.
The developer would have to use its own or borrowed funds to
finance the project. From the time of submission of the property
plans for approval until the completion of the houses, the gestation
period is almost five years (assuming building takes two years)."
[NST 29 SEPT 2005]
SALLEH BUANG
27
WHY IT WON'T WORK (cont'd)
"Is it practical and fair for the developer to bear the risks for five
years before seeing a return on its initial investment?"
"What would happen if, during the interim period, there is a
downturn in the property market and the buyer decides to cancel
his obligation to buy the house?"
"The buyer may choose to forfeit his 10 per cent deposit, but the
developer would now be left without the 90 per cent purchase
price."
"In short, the likely scenario would be abandoned projects and
bankrupt housing developers who are left in the lurch by house
buyers in the event of a property crash." [NST 29 SEPT 2005]
SALLEH BUANG
HOUSING INDUSTRY'S EARLIER VIEW:
IT WILL JEOPARDISE TARGET
It will "jeopardise the housing target set
under 9MP" - 709,400 units (private
sector to build 72%, over 500,000 units)
It will "spell the death knell for smaller
developers who playa very critical role in
smaller towns" - REHDA branches
Malacca, Pahang, Kelantan,
Kedah/Perlis, Negeri Sembilan,
Terengganu
Under the present system, the industry
had built 2.9 million housing units. [The
Sun, 27 April 2006]
I
I
~
,"
-
f ~

r
28
SALLEH BUANG
29
ROLE OF BANKS - MINISTER
"Banks have to play their
role if the BTS system is to
take off' - Ong Ka Ting, The
Star, 13 September 2005.
SALLEH BUANG
IMPACT ON BANKERS - HBA
"Banks will be able to revive and take ove
abandoned projects much quicker, without having to
deal with so many parties."
"Bank will be able to operate in a more secure
environment; it will have absolute control over loan
disbursement and collateral".
,- "Banks will be more secure as they will only be
.,,,, financing completed properties with titles" - Datuk
Goh Seng Toh, HBA vice-president.

"HBA- _ NATIONAL HOUSE BUYERS ASSOCIATION

.,. SA,roAN KEBANGSMN PEMBEU RUMAH
., ,
" ,
- 30
SALLEH BUANG
INCENTIVES FOR DEVELOPERS
31
Faster development approval
Deposit of RM200,OOO waived
Medium cost houses instead of low-cost
housing quota
Fast track approval/Fast lane /
Express land
- One Stop Centre
- Certificate of Completion and
Compliance
Inspectorate to monitor housing delivery
system
BUSTING RED TAPE
GUIDEBOOKS 14 APRIL 2007
SALLEH BUANG
SALLEH BUANG
32
INCENTIVES EXPLAINED
One-Stop Centre (OSC) will process development applications simultaneously;
committee headed by council presidents and made up of other technical
departments officers;
Certificate of Fitness for Occupation (CFO) replaced by Certificate of
Completion and Compliance (CCC);
Building and Common Property Act 2007 to ensure better maintenance and
management of stratified properties;
Waiver of deposit for developers for BTS system;
Option for developers to replace the quota to build low-cost homes with
medium-cost homes.
Approvals for selected projects (eg BTS, high-impact projects, government and
foreign investors' projects) would be even shorter - within four months. [NST
14 APRIL 2007]
FAST TRACK APPROVAL
,

,
Concurrent applications of Conversion and Subdivision (124A National
Land Code), Surrender and Re-alienation (204D National Land Code),
Planning Permission and Building Plans approvals can be made to the
OSC.
The OSC committee will replace the local authority's planning and
development division and will be chaired by the chairman of a local
authority.
Its members will consist of officers from various technical departments
such as the Land Office, Land and Mine Office, and technical
departments like the Town and Country Planning Department, Public
Works Department, Drainage and Irrigation Department, Tenaga
Nasional Berhad, Department of Sewerage Services, State Water
Authority, Mineral and Geoscience Department, and Fire and Rescue
Department.
A flow chart has been prepared setting out in detail the processes and
a time frame for each technical department to ensure that
development proposals are approved within four months.
SALLEH BUANG
A VY i'")' to iJ C "OPN<t
Property.com.my
THE 10:90 VARIANT
[iProperty.com.my]
The 10:90 variant is not a "true BTS"
It is still a BTS system, but with a "deferred payment"
',. '.
schedule.
Deposit of 10% paid to developer's solicitors and the
sale is "locked in"
To the purchaser, it is still a purchase based on
brochures and plans; the purchaser is, however,
protected if the project is later abandoned by the
developer.

34
SALLEH BUANG
IMPACT OF THE 10:90 VARIANT
. r - .
A new SPA must be drawn up, which

requires
- an amendment of the 1989 Regulations;
alternatively
- a new set of Regulations.
HBA Legal Committee proposed a
new draft Schedule J & K
- 10% upon signing of SPA
- 90% upon completion (24/36 months) of
property, together with GF (now GGG)
and issuance of titles

. ~ ~
c o ~ ~ ' ..
. .'
- -
35 SALLEH BUANG
BTS WILL CUT COSTS: ONG
"Logically, the BTS concept can lower developers'
costs because the new system launched by the
Government helps to save their time.
"In the long term, it will help to make house prices
more competitive."

36
[Ong Ka Ting, in
14 April 2007]
Bersama Menter; program RTM1
SALLEH BUANG
TAY AH LEK
BTS WILL BENEFIT BUYERS: BANKERS
J
MICHAEL
LOR
"With reduced processing time, there will be
significant improvement in business efficiency
and productivity. This will also reduce the
holding cost for developers, which can then be
passed on to consumers," Datuk Seri Tay Ah
Lek, Chairman of Association of Finance
Companies of Malaysia.
"The BTS concept will clearly benefit customers
and we are ready to assist our present and
potential customers by making home ownership
a simpler and efficient process." Michael Lor,
Head of Consumer Banking, RHB Bank Bhd.
[The STAR, April 14, 2007]
37
SALLEH BUANG
HOUSING INDUSTRY'S CURRENT STAND
"The PM should be congratulated for his
initiative to improve the public delivery system
... It is indeed a milestone not only for the
property industry but for the whole nation... The
setting up of the National Inspectorate is a step
in the right direction" (Ng Seing Leong,
REHDA President)
"Developers applaud the incentives granted for
the adoption of build-then-sell concept and will
be encouraged to be involved with this sales
method" (Datuk C KWong, Sunway City Bhd)
Ng Seing Leong
Datuk C KWong
SALLEH BUANG
39
SUMMING UP
Two systems running parallel - STB & 10:90 Variant
Greater incentives offered to developers choosing 10:90 Variant
Banks will operate in a more secure environment
Legal Implications of 10:90 Variant
- New SPAs required I governing legislation
- Buyers less exposed to risk of abandonment
Developers not obliged to build low cost houses (effect -less units of
affordable homes to the poor)
- Developers face less BRT; OSC I Fast track will reduce developer's
holding costs (effect - not certain of being passed to buyers)
Reforms of existing / conventional system
Purchasers Warranty Insurance
- Repeal (scrap) 10% limit liability of developers; restore full remedies to
purchaser
SALLEH BUANG
THANK YOU
IMAIL
sallehbuang@hotmail.com
SALLEH BUANG
BUILD THEN SELL:
The Way Forward
The dual experiences of Bandar Utama
Damansara
Presented by
Dato' Teo Chiang Kok
Director
Bandar Utama Development Sdn Bhd
11th May 2007
INTRODUCTION
1. ACCIDENTAL INTRODUCTION
2. 1997 FINANCIAL CRISIS
3. FIRE SALES OF DISTRESSED
PROPERTIES
4. WITHDRAW FROM MARKET I NOT
COMPETE I STABILISE MARKET
5. ALREADY 7 YEARS DEVELOPING
BANDAR UTAMA
6. PRIVATE NON-LISTED COMPANY I NO
DIVIDEND POLICY I ACCUMMULATED
RESERVES I INTERNAL FINANCING
INTRODUCTION (CONT'D)
7. PRIVATE FAMILY OWNED BUSINESS
- PATRIARCHAL COMPANY - NO
RETRENCHMENT IF POSSIBLE
8. KEEP CONSTRUCTION TEAM
INTACT- VALUABLE HUMAN
RESOURCE I FOR ECONOMIC
RECOVERY
9. PRICES STABILISED AND
RECOVERED FASTER THAN OTHER
AREAS
CONSTRUCTION PHASE
1. FASTER COMPLETION / NO SHORTAGES
OF MATERIALS NOR WORKERS /5
MONTHS AHEAD OF SCHEDULE
2. TNB COULD NOT CATCH UP - WASTED 3
MONTHS
3. TECHNICAL CLEARANCES AND CF - 2
MONTHS FROM CPC
4. SAME DELAYS BEING EXPERIENCED
TODAY - TNB &SYABAS
MARKETING PHASE
1. FORTUNATELY, ECONOMY RECOVERED IN TIME
2. DO NOT NEED ADVERTISING PERMIT AND NEED NOT
USE SCHEDULE G SALE AND PURCHASE
AGREEMENT
3. NORMAL COMMERCIAL 'SECONDARY MARKET TYPE'
AGREEMENT
4. PROVIDE STANDARD 3 MONTHS FOR BALANCE OF
PURCHASE PRICE TO BE PAID UP
5. WHEREAFTER THEORETICAL 1 MONTH FOR
CONFIRMATION, BANK UNDERTAKINGS,
PRESENTATION OF TRANSFERS AND END-FINANCE
RELEASES
6. EMPIRICAL EVIDENCE: HANDOVER 4 TO 6 MONTHS
FROM SALE
HANDOVER OF PROPERTIES FROM TIME OF
SALES UNDER BUILD THEN SELL
Phase 5
12
1.5%
11 10
2.9% 2.4% 1.5% 1.0%
'-'--,-T ' . _ ~ - .
6 789 5
12.0%
1-------------1
4
69.0%
----5'8%:--
3.4%
0.5%
0% ~ - -1 .--,--
1 2 3
60% J-------
80% r
70%r-----
~ 50% +-------
S
C 40% 1--- _
~ \
I Q,) 30% ! ~ _
Co I
i
Months
HANDOVER OF PROPERTIES FROM TIME OF
SALES UNDER BUILD THEN SELL
Phase 6
60% ,----------------------,
52.1%
I -- - ~ , - ~ , ------r - ~ ,
50%
!
i 01
40
%1
I ~ ,
,Cll '
I ~ 30%.-:-----
l:
~ 20% +---1 _
"
,
!
10% +------
1.6% 2.7%
0% : IIIIllLr-. ,- -
!
-------------, I
I
I
---c-
4
.
S
7c-%----------------I I
0.5% 1.6% i
.,--
1 2 3 4 5 6 7 8 9 10 11 12 13
Months
-------_.__.._-------
NEGATIVE FACTORS
1. HIGH RISKS I MUST COMPLETE AND LAUNCH AT
THE RIGHT CYCLE
2. UNCERTAINTIES AND DELAYS: PLANNING AND
BUILDING PLANS APPROVALS I UTILITY SUPPLY
I CLEARANCES AND CF
3. UNCERTAINTIES AND DELAYS: END-FINANCING
APPROVALS I ADJUDICATION FOR STAMP
DUTIES I BANKERS', LAWYERS' TIMELY ACTIONS
4. SAFEGUARDING PROPERTIES AFTER
COMPLETION UNTIL VACANT POSSESSION I
EXTENSION OF INSURANCE I PAYMENT OF
ASSESSMENTS AND QUIT RENT DURING
CONSTRUCTION I MAINTENANCE
NEGATIVE FACTORS (CONT'D)
5. DE FACTO EXTENDED WARRANTY
PERIOD
6. PURCHASERS NOT ABLE TO MAKE
CHANGES I UPGRADE FINISHING DURING
CONSTRUCTION - DENIED CHOICE
WHILST DEVELOPER MISS OPPORTUNITY
OF ADDITIONAL WORKS BUSINESS
7. EXTENSIVE RENOVATION BY BUYERS
AFTER HANDOVER : WASTAGE - DELAY
ACTUAL MOVING IN
10/90 VARIANT
1. PRE-SELL WITH 10% IN ESCROW ACCOUNT
2. NO ADVANTAGE IN CASH FLOW FUNDING
COMPARED WITH BTS
3. LOCKED IN SELLING PRICES - EXPOSED TO
HIKES IN CONSTRUCTION COST WITH NO
RECOURSE ON SELLING PRICE
4. PRE-SELL DOES NOT GUARANTEE COMPLETION
I BUYERS CAN RENEGE I LEGAL RECOURSE
TIME CONSUMING
5. BRIDGING FINANCIER MAY REQUIRE ACHIEVING
LEVEL OF PRE-SALES BEFORE FUNDING
PRE-REQUISITES FOR BTS
AND 10/9,0 VARI!ANT
1. KEY REQUIREMENT: CONTRACTUAL
SPECIFIC PERFORMANCE BY ALL
PARTIES I APPROVING AUTHORITIES I
CONTRACTORS I MATERIAL SUPPLIERS I
UTILITY SUPPLIERS I BANKERS I END
FINANCIERS I PURCHASERS
2. APPROVING AUTHORITIES I TIMELY
APPROVALS TO ENSURE DOVETAIL WITH
PROJECTED FAVOURABLE ECONOMIC
CYCLE UPON COMPLETION
3. CCC DELIVER PROMISES
PRE-REQUISITES FOR BTS
AND 10/90 VARIANT (CONTO)
4. CONTRACTORS I LAD
5. UTILITY SUPPLIERS I BACK TO BACK LAD
6. WILLINGNESS OF BANKERS TO PROJECT
FINANCE
7. END FINANCIERS I UNDERTAKING FOR
TIMELY RELEASE UPON CCC
8. PURCHASERS: NO RENEGE CLAUSE
9. HAVE TO ADDRESS BURDEN OF LOW
COST QUOTA I BUMIPUTERA QUOTAI
DISCOUNTS AND AUTO-RELEASE
MECHANISM
CONCLUSION
1. WHY BANDAR UTAMA CONTINUING WITH BTS
2. GOODWILL AND PUBLICITY OUTWEIGHS
NEGATIVES
3. ONLY IN SITUATION OF DEMAND EXCEEDING
SUPPLY I LOCATION
4. PROJECT FINANCING COST I OPPORTUNITY
COST LOWER THAN APPRECIATION OF
PROPERTY PRICES UPON COMPLETION
5. TO EXTEND TO OTHER PROJECTS NEED
GOVERNMENT TO PUT IN PLACE ALL THE
INGREDIENTS TO MAKE BTS POSSIBLE AND A
FEASIBLE CHOICE
ThanK YOU!
_ .. ,.I
IIIeI ~ J.J llNIJ s J.J tllllJ ~ '.1

AMI _ "'..."..
_.... _-
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---
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15
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"
"
,
,
"
"
..
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KHDNG & JA.AfAp SON BIolD
TOTAL
1"'-1"'"
:a.s -1l',.su
1"-13t,.32t
.ztM- t3a,71t
o RIoslll...Usl 170,K 175,." 'l2.UI 1a7." ne."
.c_......~
"'.., '1)""
n._ 1,,!tO' ",.Ie 1',H3 :u.,n '.,151
",'"
"""'sl<tal ',271 I,."
'"'
, . ~ 7,n.
.-
1,010
'.-
7,11' 7,IU .n3
0

-
510t02
""' "'"
nl21
"",
n071
- "'
.. -
110723
~ -
...... ou....
.....,
17....'
.'"
.u, 7.1.
'...'
.-
.....
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u ..... 12.'"
,- ....
-
",M
... ....
""
....,.
'...
NUMBER OF REGISTERED MARRIAGES
STATE 2000 2001 2002 2003 2004
JOHOR 17,809 14,843 18,409 19,585 20,669
PENANG 7,913 7,661 9,208 8,385 8,195
KlANG
VAlLEY 44,389 34,921 34,695 36,340 33,854
MALAYSIA 1411,714 145,362 150,710 158,740 160,064
Source: De Irtment of Statistics Mall IiI
llMONG &- JAAFAR SON BMO
., .
AGE COMPOSITION OF THE POPULATION
AGE GROUP
KLANG VALLEY
Cumulative
MALAYSIA
Cumulative
35--44 yrs
55-64 yrs
15-74 ylS
H5yrs
840,744 15.1% 84.1%
495,415 8.9% 93.0%
233,762 4.2% 97-2%
111.313 2.0'1. 99.2%
45,925 0.8% 100.0%
3,188,623 13.7%
2.094.722 9.0%
1,163,734 5.0%
605,142 2.6%
279,296 1.2%
82.2%
91.2%
...,..
98.8%
100.0%
Total 5,563,995 23.251,403
ROUGH GUIDE FOR HOUSE PRICE LEVELS BASED ON HOUSEHOLD INCOME
(4.5,) AND ANALYSIS OF CURRENT MARKET TRANSACTIONS AND FOUNDED
ON OWNEROCCUPAnON (EXCLUDING INVESTMENT PURCHASES)
HOUSEHOLD INCOME HOUSE PRICE
PER MONTH
RM1,OOO
RM2,OOO
RM3,OOO
RM4,OOO
RM5,OOO
RM10,OOO
RM15,OOO
RM20,OOO
RM30,OOO
RM40,OOO
RMSO,OOO
RM54,OOO
RM108,OOO
RM162,OOO
RM216,OOO
RM270,OOO
RM540,OOO
RM810.000
RM1,08O,OOO
RM1,620,OOO
RM2,160,OOO
RM2,700,OOO
;;1 ~ " , ... ,,,._
I(WONG" JA""''''A SON liMO
HOUSE PERFORMANCE -1985 TO 2006
IIET Y1!.LD IN
l:l{PECTEO
HOUSE CAG" CAGR CAGR
"OR
TOTAL
LOCATIO" ".U '1-05 11-05 01-05 ,...
""
2005
""
RE1lIRN
OS,
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"' ._-_",.-" .. _ ..... , -) .. _-_.. f _
SELL OFF THE PLAN
VS BUILD AND SELL
1. There is a serious move 10 Ihe established "sell of the
plan" housing delivery syslem with a mandalory 10190 syslem
where 10% is paid on purchase and the bala""e 90% only on
complelion. The 10190 syslem is a varianl of the build and sell
syslem.
2. This would be mosl unwise, as a mandalory imposition of Ihe
system, as opposed to it being amarket choice, will, teteres
paribus, lead 10 an oligopolic market and higher house prices in
Ihe long run.
3. To view the crux of the argument against this system as a
replacement il is important to firstly understand Ihe role of the
developer.
KtlOtm I J ...... F... R SOli BItD
4. He is essentially an agent entrepreneur who, seeing
housing development opportunities in lhe property
m a r k e ~ enters lhe market, assembles land, technical
expertise and finance and delivers a needed product
for the public. The developer undertakes the risk and
is adequately rewarded. The authorities should assist
him as much as possible in fulfilling his vilal role. By
helping means ensuing fair treatment in approvals but
not extending to lessen his risk unless by lessening
his risk he shares his reward.
5. Premised on this understanding of the role of the
developer, it is clear that if you increase his cost in
anyway the cost in fact is passed on to the house buyer.
The model I will show at the end of this presentation will
illustrate that a mandalory imposition of the 10190 system
is an enormous cost to the developer and this will have to
be, ullimatefy, borne by the house buyer.
5. However this does not mean that the Build and Sell
system of housing deliver has no place in the
housing framework in Malaysia. It does.
It is a delivery system that ought to be permitted to
run I!arallel with the Sell off the Plan System and
where developers who are financially well placed,
report to as and when market conditions demand it.
A developer may resort to the system as a marketing
tool. The "deferred payment scheme" in Singapore
pays such a role, its overall pitfalls, particularly in an
ascending market, notwithstanding.
KHONG & J.Il.lll'ilR SON 9110
,
6. Then there is the question of financing. Under the Sell off the Plan
system banks have measured their risks, over the years, and have been
an active partner 10 the developer and have enabled the developer 10
secure easy funding. Project and mortgage lending for property
devek>pmenl has been relatively high in tenns of Iotal bank lending. H
the Build and SolI system were to be mandatorily Imposed as the sole
system of housing delivery (and I belieYelhal no country in the world has
mandatorily imposed this system as the sole system of housing delivery)
the risks in lending will increase substantially. There wi. be increased
risks for the lending institutions because how can the lending lnslnulions
lor example be assured lhal purchasers who sign up and pay their initial
10 per c e n ~ staywith their commnmentlo purchase, at completion.
There has been somewhat of adeafening silence 00 this issue from the
lending insIilutions in the public debate so far.
7. Lastly, there is the question of whether it is good policy to encourage
speculation and flipping in arising housing market as this will be one
of the fall outs of the system should the build and sell system be
imposed mandatorily as the sole system for housing delivery.
~ M A N K
-------_.__.....
ELVIN FERNANDEZ, FISM, FRICS
REGISTERED VALUER, CHARTERED SURVEYOR
MANAGING DIRECTOR I I'{ JQNG . JAA'Al<
11 MAY 2007 K"/' r "-
Ali Rights Reserved
Copyright @ 2007 Elvin Fernandez
TEL: +603-22829699 FAX: +603-22829799
HIP: +6012-2184542
e-mail: khongja@po.jaring.my
website: www.khongjaafar.com.my
----------
KIlONGl JUF"R SON RHO
Mathematical Model on
~ y s t e m v s .
Conventional System
,
JJ}
Ong See Lian, KMN
Past President - Institution ofSurveyors Malaysia
Partner - Juru Ukur Bahan Malaysia
Director - Davis Langdon & Seah Malaysia Sdn Bhd
Chairman, RlCS Asia Pacific
1
INTRODUCTION
~ The Build-Then-Sell concept was first mooted by our Prime
Minister some years back, in his agenda to enhance the
delivery system both in the public and private sector
~ Since then there has been intensive public debates over the
merits and demerits of the concept
~ The consumer public, in particular the House Buyers
Association (HBA) argued that, the existing system of
progressive payment during construction had put house
buyers at greater financial risks due to delayed or
abandoned project, defective houses, etc
~ HBA further argued that financing construction is the
responsibility of the developer and the buyer is only to seek
his financial requirement to buy the completed house
2
INTRODUCTION
~ Developers argued that the present system had
successfully helped in the construction and completion of
675,000 units by the private sector under the 8
th
Malaysia
Plan.
~ In response to consumers' complaint on numerous
incidences of abandoned projects and shoddy
construction, developers argued that one does not need a
sledgehammer to kill an ant. The solution, they say, is
more effective and transparent enforcement

~ They further warned that implications of forcing developers

to sell only homes that are completed will be painful and far
reaching
3
INTRODUCTION
~ It was reported that one of the top officials of REHDA even
suggested prices of houses will escalate by between 30%
and 100%
~ They even suggested if the BTS system is made mandatory,
it will affect the country's home ownership agenda as well
as the economy, because "60 per cent of the developers
will go out of business"
~ Though relenting the move towards BTS, the developers
subsequently conceded that the BTS should co-exist with
the existing system, so that buyers would "have a choice"
4
INTRODUCTION
~ On June 22, 2006, the Deputy Prime Minister announced, after
chairing the 54
th
meeting of the National Council for Local
Authorities, that the Government had agreed "in principle" to the
introduction of the new Build-Then-Sell concept known as the
"10/90" concept to co-exist with the existing system
~ Along with this announcement, a series of "perks" was also
offered to developers adopting the "10/90" system such as:
Waiver of the deposit of RM200,OOO-OO deposit for developer's
license
Building medium-cost houses in lieu of the low-cost housing quota
Fast-track approval for their projects (4 months has been
suggested)
~ The Government reiterated that this approval is only "in
principle" approval only and would like to re-evaluate its
effectiveness within a period of two years
5
ISSUES
.Would the Build-Then-Sell (10/90)
system result in price increases of
houses?
.If so, to what extent?
.Should the Build-Then-Sell (10/90)
system be a permanent feature in our
housing industry or should it be allowed
to co-exist with the existing system?
6
OBJECTIVE
~ To examine the cost impact of the 10/90
system vis-a-vis its implication on the
purchase prices
~ To arrive at a reasonable conclusion on
the effectiveness of the 10/90 system
7
METHODOLOGY
~ Cost Modeling on 4 selected projects (hypothetical)
Condominium Project
Landed Property (Terrace Houses) without the low-cost quota
Landed Property (Terrace Houses with quota low-cost houses
based on progressive billings
Landed Property (Terrace Houses) with medium-cost houses
based on 10/90 payment system
~ The cost models are based on Cash Flow Projections over
construction period of between 24 to 36 months
8
Cash FlowSample CFsample(for
. PP).xls

CONDOMINIUM DEVELOPMENT
Location: Suburb of Kuala Lumpur
PROGRESSIVE BILLLNG
7) Prellmirl8ri""
8) Contingencies
9) Professional Fees
, 0) Construction Supervision
, 1) Project Management and Adminislnulon
12) Marketing & Promotion
TOTAL CASH OUTFLOW
10.942
2,412
10.942 2,412

,..
".
.0' .0'
1.206
2,1!51

"2

'0'

...
.,
" ., .9

13,708 3,687
(2.766) (1.'75)
0 (2.621 )
(55) (80)

0
(2,821) (4,076)
,
9
'0'
,..
...
.,
66
'6
.0.
1,809
',.09
5,415
3,769
(3.606)
(4,076)
(1,'54)
o
(7.835)
2

,
,

5.346
3,341
5,774
1.083
902
722
32.984
(2,190)
1 ,877
32,671
10.942
98,568
10,942
,..
2'.
2.015
1.206
120.600
131,542
Years
Quarters
Mo"","
RM 'CQQ
...
,..
2.0%
1.0%
1.0%
8.00% PA
PA
66.824
NET CASH FLOW
Casn Surplus/Deficit
Surplus/Deficit elF
Interes' Paid on Deficit
Interest Income on Surplus
S ....pluslDeficit elF
CONSTRUCTION CASH FLOW
CASH OUTFLOW
1) bend Cost
2) Legal Fe.s & Stamp DUlY
3) Pl........ ng Fees
.) Pre_Dotv Cost & Authority Contr1butlon
S) IVVK Contribution
6) Construction Cost
Main e ...ilding Wol'1<,s
Wor1<s & Servlces
CASH INFLOW
') Lend V.h.Je
2) Sales Pregress Pa\'fTIents
Condominiums
TOTAL CASH INFLOW
9
ASSUMPTIONS
Land cost: fully paid up
~ Legal Fees & Stamp duty: 1% of loan amount
~ Planning Fees & Titles: RMO.50 per sq.ft. of land area
Pre-development cost &
Statutory Contributions: 2% of TOC
IWK Contribution: 1% of GOV (excluding low-cost)
~ Professional Fees: 8% of Construction Cost
~ Construction Supervision: 1.5% of Construction Cost
~ Project Management and Administration: 1.25% of
Construction Cost
~ Marketing and Promotion : 1% of construction cost
~ Interest Charges: 8% per annum
~ Contingencies: 5% of Construction Cost
10
ASSUMPTIONS
~ For conventional system:
~ ' " Condominium: Sales commences 1
st
month of
commencement of construction and progressively
sold during construction and achieve 100% sale on
month 36
~ Terrace, LC &MC Houses:
Sales commences 1st month of commencement of
construction and progressively sold during
construction and achieve 100% sale on month 24
~ Progressive billings are made in accordance with
the Schedule of Payment under the Standard SPA
11
ASSUMPTIONS
.For 10/90 System
10% of Purchase Price is paid upon
signing SPA
90% upon Vacant Possession
Note: Out of 90%, 5% is paid to stake-
holder. 2.5% paid 6 months after VP and
balance 2.5% paid after DLP
12
ASSUMPTIONS
~ That bridging finance will be readily
made available to the developers
~ T h a t the economy will sustain the
progressive take-up rate during
construction i.e. no major economic
crash
~ Selling price is maintained throughout
construction period
13
Model 1: Condominiums
(RM)
(A) 10:90 (B) Progress Variance (A-
Payment Billing B)
Selling Price 450/sf

450/sf -
Total Dev. Value 120,600,000 120,600,000 -
Land Value 10,942,272 10,942,272 -
Max Draw-Down 78,201,208 18,784,647
59,416,561
Interest Charges 8,551,373 2,190,179 6,361,194
Total Dev. Cost 107,845,656 100,748,351 7,097,305
Surplus/(Deficit)
14,100,734 21,728,915
(7,628,181 )
RODC
13% 22% -9%
RODV
12% 18% -6%
14
Model 1: Condominiums -
Sensitivity Analysis
10:90 System Selling Price
RM/sf
482
481
RODe
220/0
21 %
RODV
180/0
18%
Appx. 7% increase in selling price of 10:90 System
will generate the same RODe & RODV as Progress Billing
15
,
Model 2: Terrace Houses
(RM)
(A) 10:90 Payment (B) Progress Variance
Billing (A-B)
Selling Price 342,OOO/unit 342,OOO/unit
-
(190/sf) (190/sf)
Total Dev. Value 61,560,000 61,560,000
-
Land Value 20,190,060 20,190,060
-
Max Draw-Down 23,448,945 5,023,449
18,425,496
Interest Charges 1,505,630 134,354 1,371,276
Total Dev. Cost 54,144,811 52,557,534 1,587,277
Surplus/(Deficit) 9,259,854 11,124,699
(1,864,845)
RODC 17% 21% -4%
RODV
15% 18% -3%
16
Model 2: Terrace Houses -
Sensitivity Analysis
10:90 System Selling Price
RM/unit
352,800
351,000
RM/sf
196
195
RODe
21%
20%
RODV
18%
17%
apprx. 3% increase in selling price of 10:90 System
will generate the same RODe and RODV as Progress Billing System
17
Model 3: Housing
(RM)
(A) 10:90 Payment (B) Progress Billing Variance
(with MCA) (with LC Flat)
(A-B)
Selling Price
- Terrace Houses 342,000/ unit 342,OOO/unit
-
- LC Flat
(190/sf)
(190/sf)
-
- MCA
-
42,OOO/unit -
100,OOO/unit
-
Total Dev. Value 155,810,000 145,776,000 10,034,000
Land Value 43,560,000 43,560,000
-
Max Draw-Down 52,912,379 11,326,168 41,586,211
Interest Charges
3,546,643 311,606 3,235,037
Total Dev. Cost
132,353,548 125,198,903 7,154,645
Surplus/ (Deficit)
30,100,056 27,834,103 2,265,954
RODC
23% 22%
1%
RODV
19% 19%
1,9%
CONCLUSION
The 10/90 system would result in an
increase in total development cost due
to the additional financing cost
The impact on cost and selling prices
would be as follows:
Impact on Impact on
Development Selling Prices
Cost
Condominium
9-10% 7-8%
Terrace Houses
4-5% 3-4%
19
CONCLUSION
Where medium-cost houses are allowed
in lieu of quota for low-cost houses,
there is no financial loss to the
developer if he adopts the 10/90
system
~ T h e 10/90 system should be workable if
it has the strong support of the financial
institutions and further support by the
authorities in simplifying the approval
processes
20

21
)

B U I L D ~ THEN-SELL:The Way Forward

l1'h May 2007
Matrade Hall (Level 3), Menara Matrade
PAPER 10
TIME: 5.00 P.M
TOPIC: "10:90 CONCEPT: THE FINDINGS OF THE INSTITUTION OF
SURVEYORS, MALAYSIA"
SPEAKER: Sr DR HJH ZAllAN MOHO ISA
10:90 CONCEPT .
TIlE FINDINGS OF THE BTS COMMmEE OF TIlE INSTITUTION OF SURVEYORS,
MALAYSIA
A paper presented at Build-Theo-sell: The Way Forward Seminar
11 May 2007
Menara MATRAOE
Kuala Lumpur
Sr Abdullah Thalijh Md Thani
Deputy President
The Insmulion 01 Surveyors, Malaysia (ISM)
Sr Dr. lailan Bl Mohd lsa
Build-Theo-Sell Commillee
The Institution 01 Surveyors, Malaysia (ISM)
Abstract
The purpose of this paper is to present views of the BTS Committee of the Institution of
Surveyors Malaysia (ISM) on the housing delivery system in the country. This paper
discusses housing delivery system within the framework of the industry key players of
buyers, developers and bankers. The government is the promoter for the proposed
10:90 Build-Theo-Sell (BTS) concept, which was launched on the 1 3 ~ April 2007. In this
score, this paper examines the current delivery system of Sell-Then-Build (STB) and
proposed 10:90 Build-Then-Sell CBTS) concept The strength 01 both systems is
presented. ConcurrentlyI it highlights problems in the current ST8 system and probable
issues derive from the proposed BTS system. Views from the three key players in
housing delivery of the Housing Buyers Association (HBA), which represented house
buyers, developers and bankers, form the basis of the study. The findings are drawn
from information collected during interviews with the key players in the housing
development industry. Finally, this paper concludes that both STB and 10:90 BTS
concepts should be viewed as business strategy in delivering housing units into the
market.
10:90 CONCEPT IN HOUSING DEUVERY
THE FINDINGS OF THE BTS COMMITIEE OF THE INSTITUTION OF SURVEYORS,
MALAYSIA .
--------------------
1 INTRODUCTION:
The purpose of this paper is to present views of the BTS Committee of the
Institution of Surveyors Malaysia (ISM) on the housing delivery system in the country.
This paper discusses housing delivery system within the framework of the industry key
players of buyers, developers and bankers. The govemment is the promoter for the
proposed 10:90 Build-Then-Sen (BTS) concept, which was launched on the April
2007. In this score, this paper examines the current delivery system of Then-Build
(STB) and proposed 10:90 Build-Then-Sell (BTS) concept. The strength of both systems
is presented. Concurrently, highlights problems in the current STB system and
probable issues derive from the proposed BTS system. Views from the ttvee key players
in housing delivery of the Housing Buyers Association (HBA), which represented house
buyers. developers and bankers, form the basis of the study. The findings are drawn
from information collected during interviews with the key players in the housing
development industry. Finally, this paper concludes that both STB and 10:90 BTS
concepts shoukl be viewed as business strategy in delivering housing units into the
market.
2 THE BACKGROUND: THE HOUSING DELIVERY SYSTEM
2.1 The Current Then-Build (STB) Concept
In the present system. a potential buyer makes a booking and pays 10 percent of
the sales price upon signing of the Sales & Purchase (S&P) agreement for the purchase
of a house. The buyer then makes a loan arrangement with a bank to finance his
purchase (KPKT, 2007). The bank would release stage payments directly to the Housing
Development Account (HDA) of the p<oject, upon certification by the according
to the construction stages.
In the events of any project failure and abandoned schemes, the buyer's money
is stuck and he is dragged into a very muddled legal situation. Hence. the buyers as
consumers carry financial burden during construction phase of the project and endure
the development risks.
2.2 The Proposed 10:90 Build-Then-Sell (BTS) Concept
A house buyer pays 10 percent upon signing of the S&P agreement (KPKT,
2007). The developer's lawyer who is also the stakeholder holds the payment. The
developer has access to the money when the subdivision plan is registered and proper
p<oof for the issuance of p<operty is provided. The Fidelity Fund pursuant to the
Legal Practice Act further protects the money. The buyer has to make full payment upon
the completion of the house with and issued of the certificate of Mness for
occupalion (CFO) or Certificate of Completion and Compliance (CCC). The buyer is
given a 120 days grace to pay for the house. In other words, buyer has full construction
period plus 120 days to secure his end financing.
- 1 -
In the event any failure to complete the project in accordance to the agreed
schedule and specification. buyer has the right to rescind the contract and have the
deposit returned together with any interest that may have accrued. Therefore, a buyer
does not cany any financial burden and shoulder the financing cost for the developer
and development risks of the project.
2.3 New Initiatives in the Housing Delivery System
The Ministry of Housing and Local Government has taken a bold step to improve
the housing delivery system by expanding the role of the current One-Stop Centre
(OSC) (KPKT, 2007). The Centre will replace the Local Council Planning, Development
and Building Committee and empower to make decisions through meetings that are held
on a regular basis. In other word, it will process development applications
simultaneously and systematically via a committee headed by Local Council President
and made up of other technical department officers. Hence, the time taken to approve
construction projects will be slashed from five years to six months. In addition, approvals
for selected projects including BTS housing development will be given within four
months. The shortening of time-frame would enhance business efficiency and facilitate
development of the housing market. Speedier approvals would lead to lower holding
costs, translating into better efficiency of capital investment.
Furthermore, to support housing delivery system, government provides
incentives to developers who opt for the BTS system. These include exemption of the
RM200,OOO deposit fee for housing development license. Developer are also given full
release from low-cost housing construction quota as required under the current practice,
to allocate 30 percent of the developments for low-cost housing. However, developers
are encouraged to build medium-cosl houses.
3 STRENGTH IN THE STB VS BTS CONCEPT
3.1 Strength in the Current STS Housing Delivery System
The current STS system manages to deliver houses to meet the housing needs
in the country for the past years. With the country's expanding and growth-orientated
economy, drove higher employment and greater spatial requirements for manufacturing,
service industries, and housing. The government's home-ownership policy and easy
availability of bank credit boosted demand for housing_ The system of buying houses off
the plans has worked well for the country and has helped fulfil national objectives of
providing homes for the population and generating sustainable economic growth.
At the same time, the system has proved its ability to supply housing units into
the market to meet the housing targets in the 5-year Malaysian Plans. Private
developers had completed more than the target numbers of houses for the country from
the Sixth Malaysian Plan (6MP) onward. Table 1 in Appendix A shows private
developers supplied 632.000 houses into the market in the Eight Malaysian Plan (aMP).
The figure equated to more than 218 percent from the targeted number of 289,000
houses. In fact, the completed houses in aMP were more than the target number in the
Ninth Malaysian Plan (9MP).
STS Housing DeliYef)' ZMI
- 2 -
3.2 Strength in the Proposed 10:90 BTS Housing Delivery System
The proposed BTS system is anticipated to improve the housing delivery system
in the country, which would benefrt the regulators (government) and buyers as well as
developers and bankers. Firstly, the system would filter out the bad developers from the
industry. Onty prudent developers would be in the housing industry because developers
have to understand the housing market before embarking into any development. The
system reckons developers to recharge business operation of project development. As
risks of housing development would be borne by both developers and bankers, they
would be cautious into committing speculative projects.
Secondly, the system would eliminate the practice of fiditious sales among errant
developers. There are two situations of fictitious sales. Firstly, when there is a completed
project but no takers for the launched units. A developer creates fictitious sales to
finance the project through end financing. The banker that provides consumer finance is
unaware there is no buyer for such unit upon releasing the money. Secondly, for
disbursement of project finance, a developer has to have break-even sales. The
developer creates fictitious sales to get break-even figures or sales of their projects. For
example, the development companies may use their employees as buyers of the unsold
units in anticipation of price increases in the future and resale for profits. In this score,
bankers would have to monitor closely housing development project upon the
commencement of project finance.
Finally, the housing development industry would be self-regulated in long run, as
developers would not be paid before delivering their houses to buyers. Under the
Developers' Act Section 11 (1a) - Contract of Sales, any completed houses with CFOs
are sold without subjected to the Act.
FINANCING HOUSING DEVELOPMENT
Housing development project is financed from two sources namely project
finance for the site and building construction by developers and contractors and
consumer finance for the purchase of housing units by buyers. In most cases, project
financing is highly dependant on the consumer-generated fund from initial deposits and
progress payments. The consumer-generated fund is crucial in determining the success
of the project both for project finance as well as for consumer finance.
4.1 Housing Project Finance
In project finance, bankers provide financial facilities based on the category of
developers as well as the characteristics of the subject land to be developed and
economic feasibility of the proposed housing development for funding. There are three
types of developers namely Public listed Development Company, Medium Sized Pocket
Developers and Small Sized Pocket Developers. Who ever the developers can be,
bankers appraise the borrower companies or developers, their finance health and
records of accomplishment or tract records before approving any project finance.
STS Housing Delivery ZMI
- 3-
Public Listed Development Companies have land bank. The companies seldom
borrow from banks because they issue bond to fund their own projects. If these
companies borrow to finance their projeds, the banks are willing to lend because they
have the expertise and ability to manage development projeds. They have internal
mechanisms to control the speed and volume of houses to be launched. The developers
consider 60 to 70 percent sales performance, are sufficient to earmark a successful
project. However, to some extent, the development for these developers is unstoppable.
Albeit low take up rates in the housing market, they continue to launch new phases.
They will use new designs and development concepts to gauge demand. Most of these
developers prefer to develop housing units for the niche and high-end markets, as the
markets are doing well and bankers are willing to finance both for development and
purchasing of the housing units.
Bankers are willing to provide financial facilities to Medium Sized Pocket
developers if they meet some break-even sales. The interpretation of ~ s o m e break-even
sales" would depend on individual bankers and developers. Most of these developers do
not finance their development projects. They may use joint venture (JV) method with
landowners to acquire land for development. When they launched housing units for
sales, they collect 10 percent deposits from house buyers. Developers start site works
and proceed to building construction. They also use suppliers' money to pay for building
materials. Thus, their capital outlays are low. However, in cases where they have to
borrow to purchase land. they have to launch their housing units for sales in phases to
manage their cash flow. These developers depend critically on progress payment from
buyers to finance the projects especially the initial 10 percent deposits to start-off site
works. In such cases, effective and efficient project management is crucial in
determining the success of the development.
Small Sized Pocket Developers operate housing development in a similar
manner as the medium sized pocket developers. The cost of borrowing among these
developers is low if they embark on JV with landowners for development and use credit
to pay for building materials. To remain competitive in the housing market, these
developers normally price their products (housing units) slightly lower than the other
bigger developers do.
The important characteristics of the SUbject land to be developed embrace
development cost and demand for the proposed development. The infrastructure, which
is available within the location of the proposed development, is an utmost important, due
to development cost. In addition, consumer preference in location of the development is
a vital demand indicator for housing at the proposed location. Similarly, consumer
preference for the proposed house types and together with this, the price of property
must be right for the target market segment is another demand indicator for housing.
Finally, bankers place a significant consideration on the economic feasibility of
proposed housing development for project finance. In doing so, bankers assess four
factors in such development. Firstly, bankers monitor sales performance together with
assessment of gross development value. management of construction cost and
expectations of gross and net margins of the overall development. In most cases, sale
performance is an indicator for project viability as well as consumer finance. They look
at break-even figures of the launched units for sales. Phasing of projects controls the
projed cash flow and thus, efficient and effective project management is crucial.
Secondly, the proximity of unsold and overhang projects within the locality have some
STS Housing Delivery 2MI
- 4 -
influence on the proposed development. Locations where there are too many overhang
and unsold units, auctions, and certain segments of low cost, condominium, and
apartment development, remain unfavourable for project finance. These locations car. be
considered as blacklisted areas. Thirdly, competition from other housing development in
progress or newly completed within the vicinity of the SUbject development may influence
proposed development. Finally, bankers use feasibility technique such as Discounted
Cash Flow (DCF) and break-even analysis or computation in determining economic
feasible of a proposed development before approving for project finance.
4.2 Consumer Finance or Mortgage
In the past years, the availability of consumer finance for the purchase of housing
units together with attractive financial packages drove the housing market in the country.
This is partly due to bankers' support for the government home ownership policy. Thus,
any changes in the structure or delivery of mortgage finance would give direct impact on
the overall housing market.
In considering consumer finance, the most important factor is the affordability
levels of the borrowers. Bankers assess the income levels of the applicants as well as
their other finance commitments.
The monies are released via progress payments under the current STS system
through the Housing Development Account (HDA). Banks are responsible for the
operating of the HDA and releasing of money from the HDA in accordance to the
construction progress as stipulated in S&P agreement. Developers utilise these payment
to finance development project.
5 ISSUES IN THE HOUSING DELIVERY SYSTEM
5.1 Problems in the Current STB Housing Delivery System
Problems in the current STe system are described from three perspectives of
non-performing developments, project failure and financial risks that buyers have to bear
as consumers. The complaints of non-performing developments in the industry grew
from 151 projects in 2002 to 245 projects in 2005 (HBA, 2006), which affected 28,550
buyers in 2002 to 38,315 buyers in 2005. These complaints can be categorised into
three major groups namely, poor timeliness delivery of completed housing units, non
delivery of housing units and quality housing units against shoddy workmanship and
defects. More than a third of the complaints (37 percent) were concerning poor
timeliness housing delivery and non-delivery of housing units and another 29 percent
involved strata title issues. Table 2 in Appendix B shows the numbers of such
complaints that the HBA recorded between 2002 and 2005.
Project failure and abandoned housing projects is an annoying issue in the
housing industry, even before the 1997 Asian Financial Crisis. There are many ways of
housing project failures.
BTS Housing Delivery 2M1
- 5-
The developer may run short of funds when the project could not achieve
the required amount of sales;
The developer's building contractors cannot delivery their contractual
duties of constructing the buildings and the developer may be stuck in a
legal tussle, which may also affect house buyers.
There were an increasing numbers of abandoned projects and affected buyers in
the past two years of 2004 and 2005 (Ministry of Housing and Local Government, 2006).
Table 3 shows that 261 housing projects were abandoned as at year-end 2005 against
227 projects in the preceding year. In 2005, these projects affected more than 58,000
buyers and locked up more than RM8.0 billions capital in the market.
Table 3: Abandoned Housing Projects in 2004 and 2005
(Source. KPKT 8ahaglan Penguatkuasaan, 2006)
Year Number of Number of Number of Estimated value
Proiects houses buvers rRM Millionl
2004 227 75,356 50,813 7,033.08
2005 261 88,410 58,685 8,043.00
.
The housing delivery system has to address the fact that buyers have to endure
finance risk as consumers in housing development. In the current ST8 system, buyers
have to finance housing development, when they paid the 10 percent deposit and stage
payments in accordance to construction phase. In the case of project failure, buyers are
the one that sustained losses. This system has to be re-examine. In housing
development projects, developers and bankers are profrt makers in development
progress. Hence, they should be the risk takers for the development projects. Buyers on
the other hand, are consumers in the housing delivery system, so they should be
protected from any development risks. Furthermore, the 10 percent deposits are based
on development value of the housing project. Buyers paid the amount even before the
foundation costs incurred during the construction phase. This indicates that buyers
finance housing development projects right up front before the starts of the construction
works.
5.2 Probable Issues Derive from the 10:90 BTS Housing Delivery System
Developers assert that proposed 10:90 concept may pose threats to current
housing delivery system from housing supply, house prices and project finance aspects.
There is a possibility of lower supply or production of housing units that enter the market
against the achievements of private developers between 737,000 and 655,000 units in
7MP and aMP respectively. The lower numbers of housing supply may be due to fewer
developers that have financial standing to finance housing projects especially smaller
developers. At the same time, other developers would launch smaller scales of housing
projects to gauge demand and minimise risks.
BTS Hoosing Delivery 2MI
- 6-
House prices may rise due to higher cost of doing business or construction costs
caused by higher cost of finance. The government however, gives incentives to
developers that utilise BTS system by exempting them from building low-cost housing
and RM200,OOO deposits for developer's license as well as speedier development
approvals. Thus, there should be lower house prices in the 10;90 BTS housing delivery,
as the cross-subsidies from other houses are given to the buyers. On the other hand, if
the BTS system drives house prices upward, may deprive the needy and lower income
group from home-ownership due to affordability gap.
The housing delivery system has to address the finance structure for project
finance in the new concept of 10:90 BTS. The willingness of the banking system to
finance housing development project has to be materialised.
6 ADDRESSING ISSUES IN THE HOUSING DELIVERY
6.1 Non-Performing Developments and Project Failure
Further improvements in the current STB system can attend to the non-
performing developments and project failure issues. Such improvements cover buyers'
interests, developers' licenses and operating of HOA in the banking system. The
Housing Development Act must serve as a tool to address buyers' problems and
complaints. The establishment of the Tribunal for Homebuyers' Claims (under the Act)
can provide house buyers with additional safeguards of purchasers' interests especially
quality housing. Government must insert authority to the developers to comply with the
decisions of the Tribunal for Homebuyers' Claims.
Furthermore, to ensure that developers adopt best practices and deter
miscondud, the government can uphold or non-issuing of new developers' licenses in
the future under the law. In addition, issuing of developers' ficense should cover both the
projects and developers. In this case, non-performance development (non-timely
development and non-delivery projects) should embrace both the housing projects and
developers.
Finally, bankers and financial institutions have to facilitate project finance and
improve the operational of HOA in the current STa system. There ts no clear
responsibility on the current operation of HDA Bankers would release the money as in
any other current account, upon proof of construction progress_ The developer's
professionals issue the development progress. Bankers seldom undertake any checking
on the actual progress of the development. In the advance countries, bankers take the
responsibility to monitor and check development progress before releasing any money to
finance projects. On behalf of their clients and buyers, bankers are to be fully
responsible for the releasing of money from HDA In the case non-compliance release of
monies from HDA or project abandoned, banks have to carry the financial burden rather
than passed them down to house buyers.
815 Housing 0eIiery ZMI
- 7 -
6.2 Buyers Endure the Housing Development Risks
The current STS system placed buyers as risk takers in housing development
project. As buyers are consumers and not profit makers, housing delivery system has to
protect house buyers. Risk takers and profit makers have to remain within the behaviour
of developers and bankers.
In this regards, the proposed 10:90 BTS system gives better protections to house
buyers against irresponsible developers and abandoned projects. At the same time, the
system lessens financial burden for house buyers, as they pay 10 percent deposit at the
innial stage of signing S&P. They pay 90 percent full payment upon delivery of the
housing units for occupancy.
6.3 Housing Supply and Meeting the Housing Demand
In the Ninth Malaysian Plan (9MP) period, the country requires 709,400 new
housing units. From this total, more than 90 percent (about 658,000 units) will be for new
houses while the remaining would be replacement of the existing houses. The private
sector is expected to supply more than 511,000 units of the total requirement, as shown
in the above Table 1 (Appendix A).
In the 8MP, private developers built more that 218.8% (632,000 units) of the
target figures. If we consider the targeted figure as appropriate to meet housing needs of
the nation, perhaps, this could be one of the reasons for the unsold housing
phenomenon in the industry. Table 4 shows that as at the year-end 2005, 19,577 units
of completed housing units worth RM2.632 billion remained unsold in the market. The
numbers came from more than 95,000 units that were launched into the market since 1
st
January 1997. The unsold units increased by two fold from 2003 (9,300 units), while the
launched units increased by 37 percent (69,800 units) for the similar period. This
showed that the unsold units made up of 13.3% of the total launched units in 2003 and
grew to 20.5% in 2005.
Table 4: The Unsold Housing Units 2002 - 2005
Unsold Category !Year 2002 2003 2004 2005
(Units) (Units) (Units) tUnits)
Completed units NA 9,300 15,558 19,577
Under construction units NA 54,108 63,950 61,129
Not constructed units NA 17,046 19,861 21,724
Total 59,750 80,454 99,369 102,430
Increase (units) 20,704 18,915 3,061
Percentage (%) change +34.7 +23.5 +3.1
(Source. NAPIC, 2003 - 2006)
BTS Housi'lg Deivel)' ZMI
- 8-

By price range, most of the unsold units were priced at less than RM100,OOO per
unit. Table 5 in Appendix C shows that in 2005. housing units in this price range made
up 19 percent (3,777 unrts) from unrts priced at less than RMSO,OOO (i.e. low cost
houses) and 29.6 percent (5,806 unrts) from unrts priced between RMSO.OOO and
RM100,OOO per units. These units are categorised affordable houses by Malaysian
standard. In addition, the market has another two categories of unsold units i.e. the
under construction and not constructed that had been launched for sales but no takers.
Table 4 shows that there were more than 100,000 unsold units comprising 61,000 under
construction and 21,000 not constructed in 2005. The increasing numbers of overhang
signals that the housing market is becoming saturated.
Last year, 38,526 new housing units were offered for sale, the lowest number
since 2002. In spite of this, response was lukewarm with only 40.6% taken up, lower
than 46.2% achieved last year (NAPIC, 2007). Taking into consideration the increasingly
competitive market conditions, the changing requirements of consumers as well as the
more cautious behaviour amongst prospective buyers, housing developers slowed down
the launches of new housing units. In this regard, a slower housing development
perhaps. is healthy for the industry especially for a short term.
Nonetheless, as housing market mature, developers have to produce housing
units that meet the market demand. Mass housing production can no longer meet
housing demand in the future. In order to remain competitive and to curb with the
challenging market, housing developers should be more innovative by producing quality-
housing products that meet the rising demand of consumers as a result of improvement
in living standards and quality of life.
6.4 House Prices
Market mechanisms determine house prices. Developers' argument that house
prices may rise due to higher cost of doing business or construction costs caused by
higher cost of finance under the BTS concept should be considered together with the
government's incentives. The incentives include exemption from building low-cost
housing and RM200,OOO deposits for developer's license as well as speedier
development approvals within four months. Therefore, there should be lower house
prices in the 10;90 BTS housing delivery, as the cross-subsidies from other houses (low
cost units) are given to the buyers. Speedier approvals would lead to lower holding
costs, translating into better efficiency of capital. These savings could in tum be passed
to house buyers (NST, 14 April 2007).
6.5 Financing Housing Development
Bankers receive both STS and 10:90 STS concept of housing delivery systems.
In financing housing development. they are concerned with the developers' financial
health and tract records, location of the subject land to be developed and economic
viability of the proposed development. At the same time, bankers have to improve the
operational of HOA to protect house buyers' interests.
8TS Housing Delivery ZMI
- 9-
7. CONCLUSION
As a condusion, the BTS Committee of the ISM welcome bOth STB and 10:90
BTS concepts in housing deIivefy system. The concepIs should be viewed as business
strategy in delivering housing units into the mar1cel Nonetheless the BTS Committee of
the ISM ~ the gowmment proactive appmach to strengChen the procedural
deivery system for approval of housing dew/opmenl. The impo....ment in the delivery
system in housing deYeIopment has to be holistic irMlMng boIh the puIlic and private
_ partic:uIatly key pIaye<s in producing housing unils inlO the mar1cel Developers
are urged to conduct "ProIessional' feasibility study Of mar1cel survey befOfe embarking
on any new developments. The objective of the study is to ensure that the right type of
housing unit is buill, in the right location. at the righllime and at the right price. All
housing developments inespeclive of Iocalion, building type and price have to be
martrelable and successful tIvough optimal resoun:es allocation. Further, developers
have to change the ways they are doing their business.. to remain competitive. They
are encourage to use the latest construction lechnoIogy to compete in the market.
SinUlanecusly, bankers haVe commitment to finance deYeIopment projects and in doing
so, they must provide clear and transparent guideines with regaJd to approval
conddions.
Lastly but not least, the BTS Commillee of the ISM considers the government's
_ to improve the delivery system for the property sedor -*' lead to greater
efficiency in housing projec\S, higher quality homes and laster completion of housing
units. The construction sedor especially housing deYeIopmenI should cordinue as one
main contribuIOf that has sigr1ificanI spiII-OYer elfeds on the economy.
Economic Planning Unit (EPU, 1976 - 2006) Third Malaysia Plan - Ninth Malaysia Plan,
Plillle Minister Oeparlment, Pulrajaya
Kementerian Perumahan dan Kerajaan Tempalan (KPKl) (2007) Bulcu Pane/uan:
Sistern PenyampaiIUI _ dan Proses CBdangan Pernajuan.
Ministry of Housing and Local Government (2006) from web site 1'1'","',"'" ... ,..) ":.;."
as at 1 September 2006
National Properly Information Cerder (NAPIC, 2004 - 2006), Properly Market Status
Reporls 2003 to 2005, Jabalan Penilaian & Perkhidmatan Haria, Ministry of Finance
Malaysia, Pulrajaya .
National Properly InfOfmation Cenler (NAPIC, 2007), Properly Mar1<el Report 2006,
Jabatan Penilaian & Perkhidmatan Harta, Ministry of Finance Malaysia, Pulrajaya
New Strait TImes (NST, 14 April 2007) "New steps a win-win situation for developers,
house buyers"
- 10-

APPENDIX A
T.ble1: PUBLIC AND PR.lVATI SI!CTOR HOUSING PROGI'tAMMES TARGI!T AND 1171.2005
ThIrd M'III I"ourth 'II, Fifth M',I.
Sixth M'lla tVtnth MeI, ;M M,I.
PI,n
/
1'7I-1'1I01 PI'n (1181011851
Pl'n '1.1a-1110'
AGENCY
PI,n 111110111S1 PI'" (1.....1OQO\ tt1," 2OOI-20.!2l.

T ...
l.rall !!!I!!!!
PUBUC SECT

" Public Iow-COll haYing 82,200 28,250 118,500 72,302 45,800 28,172
0.000 15,378
&4.000 82,812
"',000
IU,124
'7,000
2. Housing In l'nd Ichtm 60,000 3&,710 110,0'0 3&,112 57,500 32,058 58,100 e,Q75 1,300 7,1e8 3,000 8,420
s.oOO
3, Inltitutlon,1 QUIrt'" & .',300 20,5110 55,500 23,258 27,000 11,284 32,1100 18,778 102,700 1Z,015 112,000 .3,8Z0 48,400
ether ,ttH leccmmod,t1en
. SEOC'S Projects & olher 57,300 37,930 530580 58,373 18,700 27,a1. .5,315 .Z,315 5'.000 31,eM se,OOo .7,505
ltall pro)tetll medium
.nd high-eoll houling
Sub-Totlt 220,100 121,510 3'1,170 110,0045 "1,000 17,121 17.,015 84,542 2SO,OOO 121,124 312,000 tal,111 "7,IOS
PRIVATE UCTOR
" Privlt. OIIIIIOpers 100,000 1911,490
Lowcell houllng 00,000 22,714 37D.400 aU77 215,700 212,003
"7,000 127,$14 31il,000 94,029 71,100
Medium &. h\on-eolt 259,470 70,005 111UM 107,442 170,700 331l,&10 411,000
&M,83' 250,000 538,1D4 414,805
houling
2, Socieli.. 12,000 4,120 25,280 5,474 12,500 7,483 12.aoo 11,305 15,000 13,703 14,000 23,151 10,000
3, Individuall and Groupi 150,000 1$1l,010 150,000 ......

Sub-Tot,1 212,000 312,a10 124,130 201,133 552,500 203,102 311,000 H2,ltl 110,000 m .... 303,000 a8S,374 81',8ts
TOTAL 482,eOO 484,110 '23,300 311,t78 70t,500 300,'28 513,015
"',480 800,000 ....... .1000 U4,043 701,400
Soure.: Third MIIaYiIt PI.n (1;715), Fourth M.I.pil Plan (10"), Fifth M.lIVtia Plan (10S15), Sixth M.lIVli. Pl." (,0.,), s.....nltl M.ltyslt Plln (1090), Elgtlt M.ltyslt P18n (2000)
.nd Ninth M.I.Y''' Plan (2005)
BTS Hou,ing Delvery ZMI
11 .
APPENDIX B
Table 2: Non-Performing Developments and Complaints from House Buyers
2002 2003 2004 2005
To t a ~ o i e c t s 151 187 212 245
Total numbers of buyers 28.550 33.772 37.810 38.315
Category Types of %- %- %- %-
Com laints I (Numbers) I (Numbers) (Numbers) (Numbersl
Timeliness delivery
1 late issue of certificate of 14% 13% 15% 12%
fitness (CFOs) 139971 143901 (5672) (45981
2 Late delivery 13% 15% 12% 14%
(3711 ) (5066) (4537) (5364)
Non-delivery of housing units 6% 10% 9% 11%
(1613) (3377) (3403) (4215)
Quality housing
1 Shoddy workmanship & 11% 7% 9% 7%
defects (3141) (2364) (3403) (2682)
2 Non-adherence to building 7% 4% 3% 1%
plans (1998) (1351) (1134) (383)
Others
Ownership issues strata 27% 28% 29% 29%
title (7709) (9456) (10964) (11111)
Infrastructure 3% 4% 2% 1%
(857) (1351) (756) (383)
Management and 19% 18% 21% 23%
maintenance (5425) (6079) (7940) (8812)
.
(Source. House Buyer ASSOCiation. 2006)
STS Housing Delivery ZMI
- 12 -

APPENDIXC
TABU: 5. HlJIIl8ERN/DVAlUE Of CJlIERIW> RfSIlENlW. UNITS BY TYPE AND PRa AANGE 2ttl4 &2OD5

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STS Housing Delivery 2MI
- 13 -