Legacy of economic crises haunts housing market

Problem of decades old abandoned projects remains unresolved

KUALA LUMPUR: The impact of the mid 1980s recession and the 1997/98 Asian Financial Crisis continues to impact the housing market as a significant number of abandoned projects from that era remain unresolved decades later.

In a list dated Sept 6, 2019 on the Housing and Local Government website, the ministry indicated that there are 66 projects in the recovery planning stage and another 11 projects in the midst of being revived.

Out of this 66 projects, five should have been completed between 1985 and 1999, according to the list.

In addition, some house buyers were in a 17- and 28-year limbo before their projects were given the official abandoned status.

Notwithstanding the phenomenal run on property prices between 2010 and 2014, 15 projects were not completed during this period and four in 2015 and 2016. They were eventually declared as abandoned.

These 66 projects undergoing planned revival affects 8,683 buyers. They formed 57.39% of 15,131 built units, the list of 66 showed.

The ministry said housing projects were abandoned because of mismanagement by developers, poor buyer response, incorrect calculations on return on investments leading to developers throwing in their towel and fluctuating construction prices.

“Companies’ forward planning were also negatively influenced by the global economy, such as the economic crisis of 1997/1998 and 2007/2008 which resulted in many companies unable to continue with their projects,” the statement said.

The ministry also has a separate list, dated Sept 6, of 11 projects undergoing revival out of a total 200 abandoned projects.

Five are from Selangor, which has a total of 75 abandoned projects, the state with the highest number of abandoned developments.

Johor, which has the second highest at 25, also has five projects undergoing rehabilitation. Perak has one.

Six of the 11 projects were supposed to have been completed and handed to their buyers between 2000 and 2005, the remaining five were supposed to have been handed to buyers between 2006 and 2011, the list from the Housing and Local Government website showed.

These 11 projects affected some 2,510 buyers.

More than 70% of the units were sold. Attempts to get details on the gross development value (GDV) of abandoned housing, delayed projects and problematic projects, and their prevalence were unsuccessful.

The National House Buyers Association (HBA) collectively categorised abandoned, delayed and “sick housing projects” - three different labels given by the ministry - as problematic projects.

HBA honorary secretary-general Datuk Chang Kim Loong told Starbiz that the ministry must reveal the quantum, or value of all three categories in order to move forward in the current broken housing market.

“Isn’t the situation bad enough to make it mandatory to impose a Build Then Sell 10:90 (BTS 10:90) system?” Chang asked.

“Since the government has no solution on how to eradicate abandonment, we must have a BTS 10:90 system instead of the current Sell then Build (STB). BTS 10:90 is a hybrid of both,” he said.

Chang also suggested that a special task force be set up under the chief secretary to the government to revive these problematic projects.

“This is a national issue,” Chang said. There are more “sick projects” than abandoned ones and it is needful for the government to look into this collectively, he said.

Sick and delayed projects are likely to fall into the abandoned basket over time.

The ministry said about 10% of all licensed housing projects under construction each year fall into the “sick” category.

No ringgit value was given for this 10%. Attempts to get further clarification was not successful.

Effective June 1, 2015, there were provisions under the law to charge those who abandoned their construction, the ministry said.

“A developer is liable for prosecution, if his actions, or non-actions, result in a project being abandoned.

“No developer has been charged for abandoning a project,” the statement said.

“The civil legal suit only applies to developers of abandoned projects who received his developer’s licence after the amendment to Act 118 of the Housing Development (Control and Licensing) Act 1966 came into force.

“As of June 1, 2015, when the amendment was enforced, no developer has been charged for abandoning a project, in accordance with Section 18A of Act 118,” the statement said, adding that the ministry would blacklist these developers.

“Once blacklisted, the developer and its board members cannot apply for new advertising and sales licences and permits.

“Developers will also not be able to renew existing advertising and sales permits.

“A list of blacklisted developers is also displayed at the National Housing Department website for buyers’ reference and other stakeholders,” the statement said.

HBA questions why none has been charged.