Abandoned Housing Projects–The Problems

Hitherto, ironically there is yet, any official, legal or judicial definition on the meaning of ‘abandoned housing project’. Neither is there any legal literature and researches, except by the author, as far as the situations in Peninsular Malaysia is concerned, have been seriously undertaken to study the problem. Be that as it may, the practical definition, for the purpose of facilitation and administration, has been given by the Ministry of Housing and Local Government (‘MOH’) and is defined as follows:

 

1)         Construction and development works on site of the project that has been terminated for the preceding 6 months or more. Such termination has either occurred consecutively or occurred during the period within which the project must be completed or beyond the required completion period. Completion period means the period within which the developer has to complete the construction of the housing units. For the landed property, the completion period is 24 months calculated from the date of the sale and purchase agreement being executed, whilst for flats the completion period is 36 months from the date of the execution of the sale and purchase agreement; or,

 

2)         Within the said duration of 6 months, the developers concerned had been wound up and has been put under the control of the Official Receiver; and,

 

3)         The housing controller is of the opinion that a particular housing developer fails to carry out their obligation as a developer.

 

According to the latest report from the Ministry of Housing and Local Government (‘MOH’), until December 2004, there were about 227 projects throughout Peninsular Malaysia that have been identified as abandoned housing projects. These problems involved 75,356 housing units, 50,813 purchasers and with a value of more than RM 7 billion.  Most of the projects occurred in Selangor with 55 projects, followed by Penang (24 projects) and Negeri Sembilan (22 projects) etc. The state which has the least abandoned projects is Perlis with 3 projects. These projects can be categorized into the following categories:

 

a)          Projects which have the prospect for rehabilitation;

b)         Projects which are taken over by other developers;

c)          Projects which are not suitable for rehabilitation; and,

d)         Completed and rehabilitated projects.

 

This substantial figure is a cause of concern to the general public who may lose confidence in housing developers, in particular those who were or are already be the victims. There is also the ‘formidable problems’ of what to do with the abandoned projects: Can these abandoned projects expediently be revived? If so, how soon and how much will they additionally cost?

 

The consequences of abandoned housing projects are many. Some of them are, first, on part of the purchasers, they surely are unable to occupy the houses on time as promised by the developers in the Sale and Purchase agreement.  The construction of the houses are terminated and partly completed resulting them to be useless for occupation for a long duration of time (mostly), unless they could, expeditiously be revived. Apart from the inability to occupy the houses, the purchasers too have to pay monthly instalments to their banks. This is pathetic as the purchasers have to part with their monies but they could not get the houses. There are not uncommon cases, where banks had made the purchasers bankrupt on the ground that they failed to pay monthly instalments.

 

Further to aggravate and worsen the situation, in the event there are plans for rehabilitation, the plans and attempts to rehabilitate are not easy. Many impending problems and difficulties, subtle nor obvious, would be awaiting the purchasers and the developers. Among the traumatic problems are the impossibility to revive the projects as the projects have been too long overdue without any prospect of reviving and to rehabilitate them, needing additional and substantial costs and expenditure. Cases show that most of the purchasers are reluctant to take additional money out from their own pockets on the ground, ‘that it was not their fault’, as the ‘fault was squarely due to the developers’. ‘Thus, the developers concerned should advance their own money to revive the projects’.  Matters would not be settled that easy since most of the developers involved do not have enough money, which may be due to poor management or they had calculatedly siphoning off the company’s assets and monies through unreasonable directors’ allowances and high overhead operating costs. Worst still and of all, most of them have been wound up and the directors have absconded, unable to be traced and contacted.

 

Another problem that has been identified is the disagreement prevailing among the purchasers, bankers, local authorities and the contractors concerned when it comes to revive the abandoned housing projects. This problem is complex as is evident in many cases. Consequently, the projects could or may not be rehabilitated as there is no common consensus among them.

 

Based on researches undertaken, even though there are legislation that cater for housing development in Malaysia, record shows that, this phenomena keeps on recurring especially so during the economic downturn. This is understandable, as in the economic recession, banks would be reluctant to grant housing loans as they are many bankrupts in the country, the slow business coupled with high gearing ratio of borrowing and less generating profits by banks, traders and business entities. Further, there are many unemployed people or dismissal cases, all of which, resulting in social and economic malaise and chaos in the country.

 

It is also found that among other causes are that, the Ministry of Housing and Local Government (MOH), Local Authority, planning authority and technical agencies, had failed to strictly monitor the terms of the statutory provision provided. This is evident in certain studies that show, the legal provisions and requirements as stipulated by, for example, the Housing Development (Licensing and Control) Act 1966 (Act 118) and its regulations, are blatantly disregarded by developers without any punishment being meted out to and legal action taken by the authorities against them. Apart from insufficient legal and statutory provisions and legislations and specifically, due partly to enforcement weaknesses, the projects are prone or inevitably abandoned and yet the real culprits (defaulting developers) easily escaped from further liability and responsibility. It can be said, not exaggeratedly, that the ultimate victims will be the purchasers themselves. It follows that from the above phenomena, the miserably unfortunate fates faced by the purchasers in any abandoned housing project, should strike a chord with those who really understand their plights.

 

 

 

 

 

 

 

2 responses to “Abandoned Housing Projects–The Problems

  1. Mohd Hasyim Hj mumin

    Salam prof, I am currently doing research on abandoned housing projects in Terangganu. can you assist me how to relate neo classical economic theory of imperfect information to the house buyers as victims. Are there any of your research findings that purchasers have no precise information in term of legal rules and regulation related to the house units they are going to purchase?

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