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 on Monday.
"... 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."