The Business Times | APRIL 09, 2013
New rules give minister power to put in safeguards
[SINGAPORE] The practice of property agents collecting blank cheques from prospective private home buyers as a form of advance booking ahead of a project's launch will come under greater scrutiny.
New rules under the Housing Developers (Control and Licensing) (Amendment) Bill 2013 empower the Minister for National Development to regulate such activities, if there is a need to do so in the future, though developers will retain flexibility in their marketing and promotional activities, said Senior Minister of State for National Development Lee Yi Shyan.
He revealed this during the second reading of the Bill, which was passed yesterday.
"... the Council for Estate Agencies is already working with the relevant government agencies and the real estate industry to set guidelines on the collection and proper use of cheques. We have also made provisions in this Bill and will monitor the situation before assessing if further regulatory safeguards are needed," he added.
Market watchers say that the practice of collecting cheques varies widely, and a set of guidelines would help to standardise procedures and improve controls. For one, there needs to be greater accountability in the issuance and collection of cheques; for example, the buyer's particulars including identity card number should be properly recorded and kept in a register which can be audited to ascertain the cheques' authenticity so that there is no misrepresentation of demand.
International Property Advisor CEO Ku Swee Yong said: "The more responsible developers do issue booking forms for agents to fill when they collect cheques.
"But in some cases, the developers may leave their agents to do their own paperwork and what sometimes happens is cheques are taken by the agents without issuing the proper paperwork. There's room to tighten rules so the practice is consistent. This paperwork should be issued by the developer rather than the property agency."
Knight Frank chairman Tan Tiong Cheng notes that cheque collections, which are typically based on an indicative price range, are often used by developers to gauge the level of interest in a project before finalising its price, "similar to an IPO process". "So if the number of cheques collected is high relative to units in the project, the developer will price the project at the higher end of the range, and vice versa. Furthermore, the developer will be able to assess the level of interest for different unit types and be able to push out units that will create a sustained sales momentum."
The convenience to the buyer in giving a cheque ahead of launch is that he does not need to queue at the showflat when bookings start. "However, the danger of this practice is that it can lead to hype and create pressure on some buyers," Mr Tan acknowledged. In his speech in Parliament, Mr Lee also said that the amendments to The Housing Developers Act will require developers to provide accurate information on residential transactions to the Controller of Housing "in the same way they would to the Monetary Authority of Singapore for the purpose of loan applications".
"In other words, they will need to disclose any price discount, rebate, or any other benefit, including the reimbursement of any stamp duty or tax granted to home-buyers."
In addition, the amendments arm the Controller with legal power to collect and publish information on building projects, units sold and made available for sale by developers, and sales transactions. "Data collected will be published in an aggregated manner, as frequently as weekly, to aid home-buyers in timely decision-making," said Mr Lee.
The grounds on which the Controller can revoke or suspend a housing developer's licence are being expanded to include the developer's failure to furnish information on the project, its sale and sales transactions.
Developers are also required to accurately depict homes through showflats. All structural walls of a showflat should be built in the same thickness as the final product. Using a glass panel in lieu of a solid brick wall would be misleading. All "add-ons", such as furnishings and interior fittings, must be duly labelled and made known to buyers.
Besides suspension and revocation of licences and fines, deterrent measures in the amended Act include imprisonment.
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