Developers up in arms
Published on: Thursday, October 08, 2015
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Kota Kinabalu: The Sabah Housing and Real Estate Developers Association (Shareda) is up in arms over an alleged directive issued by the government, demanding developers cut 10 per cent or more off the intended selling prices of their housing projects, when applying for their developer's licence and advertisement permits. This came after Shareda had received complaints from about seven developers with developments in the city, Tawau and Sandakan that they had received letters purportedly from the Local Government and Housing Ministry issued via the Housing Controller to make the discounts.

Its President Datuk Francis Goh (pic) on Wednesday deemed the move as drastic and inappropriate in the eyes of the law, and also untimely amid rising prices of building materials and weakening of the ringgit.

"The decision could have been made without a sound economic mind, and thus carried out without thinking of its repercussions," he said.

He said the government must allow the market forces to determine by itself, saying that any attempt to intervene its course will result in worse repercussions.

In illustrating his point, Goh said the lower profit margin will cause developers to stop coming up with new properties and thus, reduce the expansion of the primary property market.

And when this happens, the government will only encourage property speculators to ramp up the prices of properties in the secondary property market which comprises the existing properties, he pointed out.

He said the government has no control over the secondary property market, which accounts for 80 to 85 per cent in the national property index, and are largely owned by the masses, including the property speculators.

At the same time, Goh said it is not the developers who are behind the higher prices of properties in Sabah, saying that the prices are ramped up by house buyers selling their properties. "It's a misconception about the property sector," he said. He pointed out that if developers were to follow the ruling they will soon be forced into dead corners and touch bottom line and this will demoralise many developers from continuing to develop new properties in high-risk market conditions.

Still, he said, the existing unwritten ruling set at 30 per cent by the Housing Controller is considered fair although, developers are making less than what was stipulated. He said there are various risks involved to determine the selling prices of properties, including the duration of projects.

"Usually the duration of a whole project takes about five years or more from the inception.

"The annualised profit is around five per cent per annum which is considered low in the context of high-risk industry; and in consideration to cover building, labour prices, fluctuation, liquidated and defects, damages if Occupational Certificate issuance is delayed, fulfillment of changes in government policies, fuel prices.

"These are all risks involved with the selling price and is not subject to changes for the next three years from the day the developer's licence is obtained," he explained.

Towards this end, he said the Minister Datuk Hajiji Noor may not be fully aware the ruling was implemented, adding that it was also not clear whether the State Attorney General had endorsed it.

Goh plans to meet Hajiji to settle the matter amicably and said Shareda may meet later to decide whether to seek legal recourse if the ministry refused to drop the unfair administrative ruling.


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