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Malaysia property market not ready for BTS concept

Posted on April 2, 2012, Monday

Kwan Foh Kwai

KUALA LUMPUR: The Master Builders Association of Malaysia (MBAM) says the Malaysian property market is not ready for the implementation of the build-then-sell (BTS) model on a compulsory basis.

MBAM president Kwan Foh Kwai said property development was a very capital-intensive business with many of the players comprising small-and-medium enterprises.

“I don’t object to the model, but until there is a giant property company with the financial capacity to do business using the BTS concept completely, our market is not ready for it,” he told Bernama in an interview.

He said the BTS concept would increase the cost as developers would have to bear the interest which was then passed on to buyers. Likewise, he said, buyers were always looking for developers to produce affordable housing for them.

Kwan, who is also the managing director of the construction division of the Sunway Group, said implementing the BTS model without ample preparation would reduce the property supply in the market.

“Currently, the need for housing is at an average of 150,000 units per year. If we use BTS, I don’t think we have the developers able to produce that number of houses per year,” he said.

Asked if the Industrialised Building System (IBS) could offset the higher cost of construction with the BTS model, he said it would initially cost more in terms of investment for land, plant and machinery but in the long term, after the producers had reached investment break-even, IBS would be cheaper.

“But not in the immediate term,” he said, adding IBS shortened the completion time thus reducing the interest incurred that would have to be borne by the developers.

On Bank Negara Malaysia’s new guidelines on loan applications, Kwan said, “The Bank Negara policy for me is correct. Household debt has gone into the high side, and it is better for the government to relook it and manage it better.”

The issue, he said, was about the affordability of owning a house particularly in the Klang Valley.

Kwan said there was a need for better public transport to reduce car ownership and increase disposable income that could then be used towards buying a house.

The new guidelines would take a year after implementation to have an impact on the industry, he said.

“There is always a time lag in our construction industry, so I do not have  immediate feedback on the slowdown because our contractors are still building houses that have already been sold,” Kwan said. — Bernama

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