The higher cost of building materials and construction is expected to push developers to the edge of innovation, creativity and quality.

"Developers have no choice," said chief executive officer of estate agency Zerin Properties Previndran Singhe.

"To tackle the challenges head on, they have to change their approach to doing things, not only in the design of their products but also in the way they build and package them.

"They have to bear in mind that they have to offer houses people desire and can afford."

Previn, who is also a member of the Malaysian chapter of the International Real Estate Federation (Fiabci) and organising chairman of its National Real Estate Convention 2008 (NREC) to be held on Aug 26 and 27, said this issue will be one of many tackled at the event.

"NREC is a platform to inform industry players of solutions to overcome concerns given the prevailing economic and political scenarios," he said.

Fiabci’s Malaysian chapter president and Glomac Bhd group executive vice-chairman Datuk Richard Fong said small-scale developers would most likely be the most affected by higher building costs.

"Their profit margins are expected to erode considerably, especially when construction cost has gone up 30 per cent and has not stabilised … and now, the market is already witnessing a slowdown in launches."

For projects launched last year, Fong said buyers have a chance of getting them at current market prices, but for future releases, developers will either have to "reduce the standard size of a house by a third or reprice them 30 per cent more".

If not, he said there "will be little quality in building big houses".