The attractiveness of the real estate property in Malaysia is
due to lower price rates as compare to China, Hong Kong,
Singapore, Tokyo etc.
Trend No. 2: Selling Your Property Under Construction
To those who are wondering the stand of the law on the matter, Section 22D of the HDA 1966 states that selling property under construction is
actually possible with no express prohibitions.
With the green light given by the legislation, the investors will then focus on the gross profit gained after selling and overlook on the fundamental issue
on the process of selling. Firstly, the amount that the developer is going to charge them for the selling of property prior to issuance of Strata title,
notwithstanding whether under construction or completed. Below is an illustration for such charges.
RESIDENTIAL
COMMERCIAL
Governed under HDA 1966
Not regulated
Prior to April 2007, RM500 for admin fee for consent. Normally, developer
will not grant consent during construction.
Normally, developer
•
Reluctant to grant consent during construction;
•
Charge 1% of the purchase price/market value whichever higher
as admin fee
After April 2007, RM50 as admin fee
While the charges are clarified, the practical issue here is the difficulties faced by the parties of the transaction and the Developer when the Seller opts
to sell the property under construction as follow:1.
Developer is reluctance in interpreting the law that selling under construction is possible due to the following:a. Prior to the delivery of vacant possession, effectively the Developer is still the valid owner of the property (as the purchase price is not fully
paid) and should be given the discretion to voice out their reluctance;
b. Theoretically, Developer is forbid to accept advance payment for the later stages as indicated in the progressive billing; and
c. Developer intends to stop speculation and manages its administration burden.
2.
Even if the Developer is willing to apply the law as it is, the new Buyer will need to fulfill the criteria of buying the said property by cash.
3.
If liquidity is an issue, this left new Buyer to one possible way which is to allow revocation of the first Sales and Purchase Agreement and replace
the first buyer (Seller) and the new Buyer. However, the difference in pricing will then need to be addressed differently resulting in further
complication of the matter.
4.
Another factor that the Developer is concerned about is the State Authority Consent issue as it is the practice of each States now that consent
shall only be sorted after the issuance of CCC.
From the above, it is obvious that the selling of property that is under construction requires much more effort, understanding and co-operation
between the new buyer, the Seller and the Developer as well as also the bankers to make sure the success of the whole transaction.
This is a series of articles that examine the latest trends and issues in real estate investment. In the next issue, I will share with
you on the implications of residential build on commercial title. Stay tuned.
NOTES
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