APPROACH BUILD THEN SELL CONCEPT

The concept of BTS system is definitely different with the concept of STB system. STB system
allows the developers to sell the house units before they built and obtain the money from
home-buyers to fund construction or secure bridge financing through “joint venture”
arrangements with banks (Nor’ Aini Yusof, 2009). This may give chance to some developers
managed to get away from completing their projects with few financial consequences at the
expense of unsuspecting home-buyers.

Under STB system, many home-buyers complaints about shoddy workmanship, late delivery
of houses and abandoned projects, therefore, the government introduced four initiatives,
which include the establishment of a new One Stop Centre (OSC) at local authorities, the
Issuance of Certificate of Completion and Compliance (CCC) by professionals is introduced
to replace the CFO and BTS system (INTAN, 2007).

The concept of BTS system is the developers must complete a housing project before they
can sell it to the home-buyers (The Star, 2007). Therefore, the developers cannot collect the
money from home-buyers before they complete the housing project under BTS system. The
risks of housing development are shared between developers and their lending banks only.
Therefore, fewer developers adopt BTS system compared to STB system since only
developers with strong financial support are able to implement it. The housing projects that
are built and marketed by using BTS system need not comply with the statutory standard S&P
agreements.

As difference with STB system, the BTS system allows the developer does not receive
progressive payment from end-financiers as STB system. In order for the development project
to work successful, the developer need borrow higher financing from the bridge-financier to
finance the project. Hence, the bank has to play an important role by providing bridging finance
for the construction costs and this will increase the risk exposure of the financial institution.
Generally, the banks prefer to lend loan to individual purchasers in many smaller parcels
instead of lending it all to the developer in one parcel. Therefore, it is difficult for the new
started companies which do not have necessary track record to convince the bank to provide
them with the financing to do it in the new BTS system.

It is believed that the new concept will give some impacts on the current financing practices
involving the type of financial resources such as end finance and bridge finance, and the
parties involved in development project are developers and bankers. It is also believed that
the BTS system will leave a great impact on the developers and the whole property industry
since there is only the bridging finance to fund the construction activities.
In Malaysia, BTS system is not a totally alien system since a few financially strong developers
with developments in prime locations have implement the complement BTS system. There are
two main types of BTS system, which include complete BTS and partial BTS. The complete
BTS is the developer builds the house and sells when completed CCC or CFO, there is no
prior agreement as STB system, therefore, the developer entitle to sell at market price at the
time of completion. On the other hand, the partial BTS is a housing delivery system which
combined both BTS and STB. For partial BTS, the S&P agreement is signed before the
construction start and developer can collects a certain percentage as initial payment during
the S&P agreement being signed. The balance of the house’s price will be paid after
completion with CCC or CFO. The partial BTS can be 10:90, 20:80 or 30:70, the percentage
of partial BTS is depend on the developer.

The government is more concern to 10:90 BTS compare to other partial BTS. In fact, 10:90
system is still a “Sell first then Build” model since the houses are still not yet to be build at the
time signing of S&P agreement. However, if the developer fails to complete the project and
cause the abandoned project for whatever reasons, the buyers are protected from any
disastrous fallout. This option is introduced by Ministry of Housing and Local Government
(MHLG) in which the 10% deposit is paid to the lawyers as down payment upon signing the
S&P agreement and the sale is “locked-in” while the balance is payable after the completion
of CCC or CFO.

UKEssay. (2017). The Concept Of Sell Then Build. Retrieve from

https://www.ukessays.com/essays/information-technology/the-concept-of-sell-then-build-
information-technology-essay.php
According to Yusoff, Mohd Shafiei, and Yahya (2009), the STB system and its concept has
been extremely successful, ultimately delivering over 70% of the total targeted housing units
for the nation, besides generating economic growth, creating employment and meeting social
needs such as fulfilling low cost housing quotas and providing bumiputera housing discounts.
However, STB system has a dark history that had put the housing industry to shame. The
number of abandoned projects, late delivery and shoddy workmanship are among the
problems that are always has been discussed in relation to STB system (Mohd Fauzi, Yusoff,
and Zainul Abidin, 2011, Ng, 2007).