KUALA LUMPUR (Aug 1): The proposed mandatory build-then-sell model in the 13th Malaysia Plan (13MP) is expected to reshape the property market and lead to industry consolidation over time, says Hong Leong Investment Bank (HLIB) Research.

The government plans to amend the Housing Development Act 1966 to make the build-then-sell model mandatory. Currently, the law allows developers to sell homes before they are built under the sell-then-build model.

HLIB said the build-then-sell model increases financial risk for developers, as they must fund projects upfront without early cash from buyers. This can strain their finances, raise debt levels, and lead to fewer new project launches. A drop in housing supply could push up prices and hurt affordability, especially for mass-market homes.

Developers would also only recognise earnings after project completion, causing more earnings volatility.

HLIB said the impact could spread to the financial sector — banks may raise lending costs or tighten credit. Lower project launches could also hurt contractors, suppliers, and others in the property supply chain.

In its note on Friday, HLIB said the 13MP suggests the build-then-sell model may be implemented through a risk-sharing partnership, likely using a hybrid approach.

One example is the build-then-sell 10:90 scheme, where buyers pay 10% upfront and the remaining 90% upon completion. This shares the risk between buyers and developers — buyers commit early, while developers fund construction, encouraging better planning.

HLIB said developers most likely to succeed under the build-then-sell model are those with:

• Diversified income sources,
• Steady recurring income (e.g. from property rentals), and
• Strong finances to cover upfront construction costs.

HLIB said companies like Sunway Bhd (KL:SUNWAY), OSK Holdings Bhd (KL:OSK), IOI Properties Group Bhd (KL:IOIPG), and Sime Darby Property Bhd (KL:SIMEPROP) are well-positioned due to their size and financial strength.

HLIB said the build-then-sell model has been suggested before but never fully enforced because of its complexity and risk of disrupting housing supply. The government is expected to consult stakeholders first, and the policy may still be revised or applied selectively to balance homebuyer protection and market stability.

TA Securities agrees that the new rule is unlikely to be implemented right away. It warned that a rushed rollout would be disruptive, and it believes policymakers are aware of the potential implications. 

It anticipates a phased approach that balances buyer protection with developer viability, potentially through exemptions, transitional support, or segmentation by developer scale.

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