From STB to BTS... then DIBS

My previous experience in housing development took me through STB (Sell-then-build) which had a standard Sale & Purchase Agreement (used by lawyers to make tons of money if well connected to big-time developers), wherein house buyers were to pay progress payments according to progress of construction certified by the architect. It had its problems relating to abandoned projects which left buyers 'high and dry' and having to pay rental on their existing accomodation and to pay interest on portions of their housing loans disbursed.

Recently, BTS (Build-then-sell) was introduced to safeguard house buyers. Even before this was introduced, developers of Bandar Utama had decided on this because of the high appreciation in value of houses built, so that they could make more out of their development projects instead of benefiting buyers and speculators. Apparently, BTS will be made mandatory in 2015.

But in the meantime, some developers have come out with DIBS (Developers' Interest-bearing Scheme) to compromise on BTS. Effectively, instead of the developers bearing the risk during construction, buyers committed to their housing loans are doing so. Yet, some advertisements give the impression it is the same as BTS a la 10:90; 5:95 or even 0:100!

Chang Kim Loong's article House-buyers beware of DIBS in The Star explains...

http://biz.thestar.com.my/news/story.asp?file=/2012/12/22/business/12472840&sec=business

Excerpt:

"Some even have the audacity to equate the same with the 10:90 concept of built-then-sell (BTS). One even goes as far as to advertise the mode of payment as 5:95 model. The connotations in all these advertisements are that buyers do not make any progressive payments until the houses are completed and ready for vacant possession.

All these advertised "schemes" of payments are nothing more than loan packages. Although the advertisement states "no payment until vacant possession", in reality the buyers' loans are "locked-in" with panel banks/financial institutions and hence, buyers' housing loans are used to pay the developers as they construct the houses.

It is based exactly on the current sell-then-build (STB) or progressive payment formula. This formula has got so many house-buyers into trouble when the houses they buy are abandoned by the developers.

The only difference in the advertised system is that the interests towards the progressive payments are shouldered, absorbed and borne by the developers. Buyers still have to secure their end-financing housing loans as soon as they sign the SPA. Buyers are still responsible to the banks and financial institutions for the loans whether the houses are delivered or not..."
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