KUALA LUMPUR (Aug 1): The government has proposed a build-then-sell model for the property market under the 13th Malaysia Plan (13MP).
To do this, the government plans to amend the Housing Development Act 1966 to make the build-then-sell model mandatory.
Currently, the law allows developers to sell homes before they are built under the sell-then-build model.
Developers would also only recognise earnings after project completion under this model.
In reaction, Hong Leong Investment Bank (HLIB) Research stated that if the proposal is made into law, it is expected to reshape the property market and lead to industry consolidation over time, reported theedgemalaysia.com.
According to the same report, HLIB said the build-then-sell model increases financial risk for developers, as they must fund projects upfront without early cash from buyers.
This can strain their finances, raise debt levels, and lead to fewer new project launches. A drop in housing supply could push up prices and hurt affordability, especially for mass-market homes, it added.
HLIB also said that the 13MP “suggests the build-then-sell model may be implemented through a risk-sharing partnership, likely using a hybrid approach”.
“One example is the build-then-sell 10:90 scheme, where buyers pay 10% upfront and the remaining 90% upon completion.”
TA Securities stated that the new rule is unlikely to be implemented right away, with a rushed rollout being disruptive, reported theedgemalaysia.com.
TA Securities is also of the view that the authorities are aware of the potential implications.
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Source: EdgeProp.my
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