Abandoned Housing Projects In Malaysia – An Introduction

Housing industry is one of the important agendas in Malaysia since Independence day. Since then, it has been placed in the list of the top government’s priorities in the Malaysia’s Plans. After Independence, one of the most important objectives of the government is to restructure the society and eradicate poverty, through the means of the various Malaysia Plans, the pre-emptive New Economic Policy (NEP) and the National Development Policy (NDP) adopted by the government. One of the approaches contained in these programmes and means, is to provide sufficient and suitable housing accommodation to its citizens. Initially, after Independence, the duty to provide housing for the citizens of Malaya (the then Malaysia) was resumed by the Malaysian government itself, following the step of the British-led government before it. However, due to the insufficient funds on part of the government and there were upsurge in demand for housing democracy and ownership, this noble task was too, been given to private developers, for them to provide and construct housing accommodation, subject to the rules and regulations imposed by the government. Be that as it may, although housing industry has served as the development, economic and social catalyst and has brought many benefits to the nation, one of the spill-over problems which it carries, is the problem of abandoned housing projects. This problem has become a nightmare to the government and especially to the purchasers involved. Based on initial researches there are various kinds of reasons leading to such a catastrophe. It is thought that, legally speaking, this problem might have been and it is evident, due to certain legal problems.

 

In Malaysia, there are two (2) types of housing projects. Firstly, projects that are constructed by the government towards providing residential or office premises to its servants and administrators. Secondly, is the private housing project spearheaded by four types of parties, namely:

 

1)         Cooperative Society;

2)         Special Low Cost Housing Projects undertaken by private parties;

3)         Private individual and private group housing carried by people at large; and,

4)         Licensed private developers.

 

Previously, only the licensed private developers are subject to the Housing Developers (Control and Licensing) Act 1966 (Act 118). However, after the new amendment made in 2002, all of the above parties are subject to the purview of Act 118 (currently is being renamed ‘Housing Development (Control and Licensing) Act 1966 (Act 118)). This means that all housing developments commenced and carried out by the above four (4) parties after the amendment are subjected to the provisions provided in Act 118.

 

Licensed private developers are the major contributors in providing office, industrial and residential buildings to fulfill the demand of all layers of society in Malaysia. All the activities of housing development carried out by licensed private developers are now governed by the Housing Development (Control and Licensing) Act 1966 and its regulations made thereunder.

 

Even though, the housing industry has become one of the top priorities of the government, this industry, still causes possible spillover and recurring problems for the nation. One of the most plaguing enigma, is the sui generis abandoned housing projects. The causes are multifarious, but the most formidable reason is the economic recession, that has affected the whole nation.

 

 

21 responses to “Abandoned Housing Projects In Malaysia – An Introduction

  1. Much can be said about abandoned housing projects. The recession is a great hook to hang ones hat on in times of failure. Everythingg is blamed on the recession.

    An analysis of the sector in Malaysia and an analysis of many of the failed developments however tend to show something more than the mere recession. Mismanagement and fraud appear at the top of the list of faults and problems.

    There is no real effort to tackle the core issues behind these failures for one reason or the other. Unless these projects and their failures are aired in open courts people will continue to fumble in the dark for the real reasons of failures and be reliant on ill informed journalism to further confuse them.

    GRK

    • Thanks for your comment. Actually the reasons leading to abandonment are various. I think the biggest stumbling block is the lack of political will on part of the government to adopt ‘full build then sell’ system and introduce housing development insurance.

      Dr. Nuarrual Hilal Md. Dahlan
      Colgis
      UUM

      • Yes I agree but having said that is it not simply one option instead of the only option? Abandoned housing projects are the result of poor financial and project management. Unless the core issues on each of the failed projects can be disposed off in accordance with the law a remedy cannot be found. And that remedy must be just and in accordance with legal principles.

        Why should the government adopt any attitude as you suggest which will only encourage errant and irresponsible builders in future to further mismanage then abandon their failed projects?

        If government does intervene in this regard as you suggest the problem will be exasperated on the basis the government would have then created a precedent whereby they will eventually be liable in future to bail these failures out again?

        GRK

      • Agree. There should be collective efforts by all relevant parties, including me to have highlighted the issues and suggested certain plausible proposals for the government to consider.

  2. If you are open to it we have access to a highly experienced and able a team of lawyers in this field of law able to assist.

    GRK

  3. GRK
    I am championing the issues of abandon housing owners in Malaysia past 2 years via an entity that is pending registration from ROS called VICTIMS.

    We could use good lawyers to prove a point or two to the government. Pls contact me. Dr Rafick 012 221 8956

  4. An email will follow detailing our objectives and providing some background info on the legal firm I have recommended for the purpose. They have excellent pedigree in this respect and will work closely with you as it is a public interest issue.

  5. I am a victim of an abandoned project, still repaying a loan for an abandoned house that I may not see. Having paid nearly ninety percent its a total lost . When the budget was tabled in parliment recently the FM annouced another mega project ! what is it for ? Are we competing with the twin towers ? or are we creating more jobs for foreign construction workers? The goverment is responsible for issuing license to developers thus the blame for abandoned projects lay with them. Developers who neither have the means or the expertise to complete a project are given huge housing projects . Why can’t the goverment help ordinary people instead of building a mega project that benefits only the rich.

    • Good question.

      Well, in my humble opinion, there is a lack of political will on part of the government to introduce a better system of housing delivery for instance the full build then sell system.

      What the government is currently doing, through the Division of National Housing, Ministry of Housing and Local Government, is trying to manage, as efficient as possible, the rehabilitation of the balance abandoned housing projects which are still not well attended. One of the ways is to negotiate with the defaulting abandoned housing developer to resume the construction of the project and to find suitable parties (white knight) to carry out rehabilitation.

      Regards

      Dr. Nuarrual Hilal Md. Dahlan
      Colgis
      UUM

  6. Gopal Raj Kumar

    I think Dr. Nuarrual Hilal Md. Dahlan has created an opportunity for those affected by this malaise in the housing sector to come forward and to make contact with others in a similar position.

    The rest is really up to individuals. There is nothing in the legislation that you could attribute to government directly because of the constitutional protections given government under the doctrine of immunity (crown) for acts or ommission committed in office.

    I would direct you to people like Dr. Raffick who has responded on this site having taken the trouble to create a group of people in your position to create a mass or class through whom you will be able to obtain some relief hopefully thropugh the courts.

    Lawyers have much blame to shoulder fo the very poor drafting of the laws and even poorer advice they would have given their clients in many of these failed projects.

    Gopal

  7. i’m student of IPTA..i do my research about house buyers perspective and their problem on abandoned project…so,can i get feedback from you all so that i get all the problem faced by house buyers and any suggestion to overcome this situation to put in my thesis…thank you..

  8. I am one of victims of Alam Perdana Abandoned Housing Project which I considered “the largest failed housing project” in Malaysia which is the result of mismanagement by varies parties. It in fact is more than just an abandoned housing project as it involved some external political factors. The reveal of declassified official secret act confirmed that.

    I started the campaign of “Save Alam Perdana” years ago but the results aren’t promising. Should anyone wants to discuss or know more. Please contact the undersigned. I am also working together with Dr. Raffick.

    H.E.Tee (teehoieng@gmail.com)

    • I would be happy if I could assist you to lessen your grievances in the abandoned housing project.

      Today, Friday, 7 October, 2011, after listening to the PM Najib announcement of the 2012 budget, I feel relief to be informed that the Malaysian government (through the Ministry of Housing and Local Government) will take over abandoned housing projects for rehabilitation financed by government fund.

      Secondly, the Islamic bank has to amend their financing loan agreements, in that, the bank will be responsible throughout the course of the development of the housing projects purchased by the borrower purchaser. It means that, the bank will be responsible that the houses purchased by the borrower buyer will be duly completed, even though in the mid-stream of the development, the project abandoned. This is a requirement under Islamic law. Under islamic law, the owner of the house (islamic bank) will be liable to ensure that the unit can be duly completed and registered into the purchasers’ names on the latter full settlement of the purchase price.

      You can contact me through my e-mail. May be we can discuss further how to streamline and optimize the rehabilitation plan for your abandoned housing project. It follows that, a pro-team committee with proactive and motivated member purchasers to revive the project should be established.

    • There is nothing that can be achieved to redress the wrongs of the past in respect of failed housing projects in Malaysia unless one tackles the root problem not of ‘corruption’ but that of criminality by developers, lawyers, banks and associated parties all of whom are accountable to prospective purchasers who they failed.

      Defects in the legislation have only aided and abetted the criminality of these people. Government throwing good money after bad further aides the problem and sanctions the offence making it more attractive for the same class of persons to repeat their offences in future knowing that a willing government will come along and bail them out again (by funding the completion of their failed obligations).

      A first step is to appoint liquidators to each of the failed projects, conduct a complete and thorough public examination of all parties involved then pursue each of these for any amounts available from their personal and corporate assets to satisfy their debts to their victims because they are debts at the end of the day. The law provides for such action.

      Unless there is a will to tackle these problems by applying the full force of the law as it should be applied, we will continue on the slippery path of political polarization and useless rhetoric and achieve nothing in the end.

      I have thrown open the challenge to those who complain to come forward to launch class actions against each and every party involved in each of these offences. The result has been a scavangeing of victims by groups who appear to benefit from rhetoric alone making false promises to victims. Nothing worthwhile has beena chieved so far.

      My recent visit to Malaysia has been encouraging. There are now two groups who have agreed to fund an investigation into a contractor and his lawyer who have been behind a series of failed projects.

      Prelimnary information reveals negligence, trading whilst insolvent, over pricing and padding, and a general failure in performance of obligations between contractors, developers, lawyers and two banks. Other information includes collusion between banks and lawyers releasing funds to developers in breach of trust.

      .

      • Thanks Mr. Gopal for your explanation.

        Enforcement of the law weaknesses is a good point to raise in matter pertaining to the failed residential projects (or commonly known in Malaysia as ‘Abandoned Housing Projects’). This is partly due to inadequate political will of the government to fully enforce the law, shortage of manpower, knowledge (technical and legal), funding and administrative logistics as well as laissez faire attitude. Can we sue the authority on this? for breach of statutory duty…

        So far I have not as yet seen any case brought by the aggrieved purchasers in abandoned housing projects suing the responsible parties – negligent and defaulting developers, contractors, bankers, lawyers etc. I hope there would be one in the near future. May be you can initiate the action as the pioneer in the class action.

        Another important aspect is the lack of law governing rehabilitation of abandoned housing projects in Malaysia. For example no housing development insurance is required for the applicant developer before he can become a licensed housing developer under Act 118 (housing development (control and licensing) Act 1966. Secondly the government is reluctant to fully impose ‘full build then sell’ or 10-90 (in Australia or in the UK is called ‘buying off the plan) of housing delivery. Aggravating this, there is no special law governing rehabilitation of abandoned housing
        project for instance a legislation providing power to the authority to take over the project for rehabilitation.

        The recent 2012 budget revealed by PM Najib provides some milestone in tackling abandoned housing project. This is in respect of the requirement that all Islamic banks shall only fund and give loan for purchase of completed houses (not pending completion). Thus, this will avoid ‘gharar’ transactions prohibited under Islamic law (for example failed residential project/abandoned housing project). Further, the Islamic bank bears all construction risks in funding the purchase of the houses. Again this is an Islamic law element.

  9. Dear Dr. Hilal

    There is wide misperception that government has a financial role to play in curing the defects, mischief and the failings of private enterprise by bailing out negligent and overtly crooked developers, lawyers and banks.

    There is a role for government to play in how it shapes policy, interacts with private enterprise and formulates legislation.

    Government in the US under president George Bush took that disastrous and fatal step in bailing out failed banks and insurance companies that crossed the line and experimented with other people’s money (OPM). It was called TARP (troubled asset relief programme). It failed. It failed not for lack of ‘political will’ but for a misplaced sentiment that it needed government to bail out the rich and the crooked for their excesses and unaccountable conduct. They now blame president Obama for not curing their terminal financial madness. Students have now taken to the streets in their 30th day of protest in 12 cities in the US. The mainstream media there is restricted from reporting the protest lest it becomes “an American Spring”.

    Malaysia is not a nanny state. Nanny states died with Margaret Thatchers ascendency to government and the collapse of the Soviet and Chinese forms of communism.

    In places such as Malaysia as in any other place in the world, for economic survival and for prosperity to reign long term, people at every level ought to take responsibility for their own individual actions and accept responsibility for their failures as they credit themselves for their successes. People who make bad choices and fail to take proper legal advice cannot be allowed to access the taxpayers dollars to pay for thir negligence. In the same way crooked developers, negligent lawyers and banks should not be allowed to benefit for their failures and their irresponsible actions and failures.

    Government does not lack political will to deal with curing what is essentially suspect transactions on such a large scale that shows evidence of systematic and systemic corruption. That corruption too not at government or state level but at the private sector level. Aided and abbetted by general ignorance that is sheilded by opposition parties shouting ‘corruption’, these pirates of the building and construciton sector appear to believe that following the failed American example of government bailing out rogues is the way to go.

    I respectfully suggest that it is the wrong road to take and the US and Europe are living examples of the point. I think the government has a role to play in this affair. That role lies in enforcing the law which does exist.

    Where statute is weak (and it is) the common law adequately covers the deficiencies in the legislation and curing the problem can be achieved. For that to occur victims of the failed housing (or abandoned housing projects must be prepared to agitate).

    At present they are unbable to even though there may be associations supposedly taking care of their needs. Nonee of these associations from the evidence available have the requisite knowledge, understanding or direciton and purpose to litigate such an enormous and complicated task.

    I have pursued some of these “associations” and found them to be lacking in substance.

    Yes there is now some action against housing developers involved in failed projects in the past which we are assisting a prominent local lawyer in KL to pursue.

    Many thanks and kind regards

    Gopal Raj Kumar

  10. Hi,
    I am a lecturer in property development with an Australian university and i am in the middle of writing a thesis on property development process and making comparisons between Malaysia and Australia. It is veru interesting looking at how housing projects are carried out here where there is almost zero % abandoned projects. buyers are protected by paying a completed house and moving in the moment purchase price is paid. Most of the laws regarding property development in Malaysia and Australia are very similar, due to our laws being drafted with reference to British laws. I would like to share my findings about property development in Malaysia and the comparisons with the Australian developers and what the public (buyers), developers, local government and financial institutions in Malaysia can learn from their counterparts here. I am not saying the Australians system is perfect, but I have hardly come across buyers having to pay a loan where the house is nowhere to be seen. All players and stakeholders in property development need to be knowledgeable, after all it involves our hard earned money ….

    • Thank you for your comment.

      In my opinion, there are some differences between the housing delivery system between Malaysia and Australia. In Malaysia there is no compulsory housing development insurance imposed on the developers, while in Australia, Home Warranty Insurance is a must. Secondly, in Malaysia there is no compulsory ‘full build then sell’ system of housing delivery. However in Australia there exist ‘full build then sell’ system (or 10-90 system). As in Malaysia there is no housing development insurance and the government refused to implement full build then sell system effectively and expeditiously, abandonment of housing projects is a common norm today and in the future.

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