I wish to refer to Richard Teo's letter on developers' view on housing woes.

One of his complaints relates to minimum share capital of RM250,000, which I believe was imposed to prevent RM2 shelf companies from having fly-by-night operations to cheat the public.

I cannot understand why this can be a problem as a housing developer is likely to be dealing with at least tens of houses with sales value in terms of millions. Share capital has been erroneously referred to as money surrendered to the government. Surely, the money remains with the company in the form of assets and/or cash.

Presently, the government is even considering the proposal of 'build and sell' which involves the developer bearing all the costs initially as opposed to the present situation where the purchasers are bearing the costs progressively. So if his view is typical of developers, then it is a long way before we can ever have a 'build and sell' housing market.

If my memory serves me right, the developer of Bandar Utama in Selangor actual built and sold to take advantage of the fast rising prices in the 80s. They had the resources and the situation was such that the purchaser of each house made more than the developer if he were to sell upon completion of the house.

Ideally, our housing market should be able to provide ready houses for purchasers to see and choose from. The present system governed by the Housing Developers' Act (HDA) to favour the developers rather than the purchasers because of the part-financing by the latter.

I am surprised developers are still unhappy over this. The irony of the HDA is that those developers without licences are able to do as they like because they are not under its control.

If we were to examine in detail those projects which failed, one or more of the following factors are likely to be the cause:

1) Lack of experience. Many businessmen jumped on the bandwagon because of a booming housing market. Any delay in construction because of poor supervision and failure to meet requirements for Certificate of Fitness (CF) for occupation will result in claims for poor workmanship and late delivery.

2) Lack of capital. A small development company with minimum share capital of RM250,000 can easily handle a project with sales value of RM10 million. Depending on whether the company owns the land or develops on a joint venture basis with the land owner, bridging finance from the bank is normally used with a charge on the separate titles which are then discharged with the end-financing obtained by the purchasers.

Looking at this simple example, by promising more to the landowners (assuming on joint-venture basis), the developer can even use the other's titles to obtain finance for the project. In the event of failure, the developer's exposure is minimal.

3) Failure to follow strict requirements. Construction works are not carried out according to specifications (only professionals know while laymen find out when structures collapse or cracks appear).

To obtain a CF, at least 10 government departments are involved, so any non-compliance will only result in delays. There is even an example of a developer having joint ventures with a local authority who managed to start building before separate titles were issued.

The law is very strict on this - titles cannot be issued after buildings are completed. As a result of this and other factors, CFs cannot be issued. How the local authority, being the body responsible for issuing the Development Order can overlook this important fact is certainly questionable and unforgivable.

I would sympathise with Teo on the requirement for a certain quota for bumiputera purchasers. About 10 years ago, a project in Segambut was required to allot 30 percent of its units to bumiputeras.

After six months, with evidence of newspaper advertisements, the developer applied to Kuala Lumpur City Hall (DBKL) for approval to sell remaining lots to non-bumiputeras. DBKL replied that the developer should rent out the houses to bumiputeras instead!

Fortunately for the developer, the titles were freehold and there was no condition attached for transfer. There were no shortage of bumiputera purchasers who were willing to buy and sell within a short period.

This example showed that government policies - even those with good intentions - can be abused. The policy makers, being non-business minded, will not consider the businessmen's point of view.

Moreover, civil servants have this idea that all businessmen are rich and making tons of money. Holding costs? What is that? Just treat it as doing some welfare service.