So you’re finally ready to purchase your very first property – congratulations! But with this decision comes a whole new bunch of queries and concerns.
Which property development should you look at? Is it going to be built on time? Will the home look like the prototype in the showroom?
Is there a way to make sure the property developer is dependable and won’t abscond with your money?
These are all valid questions, especially for first-time prospective homeowners. As such, here are four ways to help you be more confident when it comes to one of the most important decisions in your adult life.
1. Visit their website or HQ in person
This is a clear first step you should take after stepping into a showroom or finding a property online you might be interested in.
Legitimate developers will have a website with all the information about their past, current, and perhaps even upcoming projects. Crosscheck the project details and images through a Google search, or pay them a visit in person.
You could also obtain the contact number and address of the developer’s headquarters and call or visit them. This is a good way to ensure there are actual employees, and that it is not a shell company.
Another way of verifying authenticity is to identify whether the business is publicly listed. Such companies have more credibility as they are audited and regulated by the Securities Commission.
2. Check the housing department’s blacklists
JPN, the government agency responsible for housing in Malaysia, has several blacklists you could check, including:
- developers without a licence;
- developers involved with abandoned projects;
- developers in default of homebuyer claims tribunal awards; and
- developers who have failed to pay compounds.
If the developer falls under any of these lists, you should exercise caution and look for other properties.
Those without licences usually do not have the necessary expertise to deliver high-quality homes. And even if they did, the property you bought might not be legal in the eyes of the government.
Developers involved with abandoned projects are even harder to deal with. They often will register a new name with the authorities to start another development, then repeat the process of abandoning them after getting enough money from homebuyers.
As such, it is crucial for you to verify the legitimacy of these developers with the authorities prior to committing to the property.
3. Obtain and analyse financials
If the developer is a publicly listed company, these will be relatively easy to obtain. Go to the “investor relations” section of their website to download their annual and quarterly reports.
If it is a private company, the Companies Commission of Malaysia (SSM) website allows you to purchase reports on the company you are interested in. This will consist of the financial and profit-and-loss statements, which will be useful to you.
With these documents in hand, look for the following:
- whether the developer has been operating for over five years, as a house usually takes three to five years to be built;
- whether it has made profits for at least 70% of the time it has been operating, as consistent profits suggest the developer is in it for the long haul;
- whether it has cash in its accounts, which can be done by looking at “cash and short-term investments” in the balance sheet. Make sure it is adequate: a developer with only RM10,000 in its account is likely having difficulty paying its contractors.
4. Visit past projects
Legitimate property developers will not hesitate to allow you to visit one of their past projects, so ask them or their agents to arrange for such a viewing. If they are unwilling, be skeptical.
Alternatively, you could arrange to view one of their past developments through a property agent. Just say you are a potential homebuyer, which wouldn’t be a lie.
Things to look out for during your inspection include:
- Is the property’s condition acceptable for its age?
- Do the lifts and other facilities still work?
- Are the security and surroundings good, or has the environment deteriorated?
- Do any of the residents have complaints about defects?
Sadly, some developers deliver just enough to prevent themselves from getting into trouble with the authorities. If you are unhappy with how their past projects are holding up, you are better off looking elsewhere.