Preventing Rm113b Abandoned Housing Projects

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None of our housing and local government ministers, including our latest incarnation DAP’s Nga Kor Ming, from the time of independence in 1957 have learned how to stop abandoned housing projects at source and deal with them.
That’s not because they don’t know how to deal with the problem - that’s easy - they don’t have the scrotal gumption, (I believe all housing ministers so far have been male), to use judge Mahadev Shankar’s famous expression, to do it.
Why? Because property developers are not only influential and powerful, they are a source of money to, among other things, fund elections. And DAP has become as close or even closer to developers than the MCA, the previous source of most housing ministers.
But even when ministers were not from MCA or DAP, and there have been some of them, in a matter of time, they show themselves to have become subservient to the age-old arguments thrust upon them by the developers - if such measures were imposed, it would raise house prices.
Nga has been in a similar vein - he has been active as a minister announcing all manner of schemes, including one which includes urban renewal which we wrote about here.
Housing and Local Government Minister Nga Kor Ming“Imagine, if we can push for RM322 billion GDV (gross development value), how many jobs can be created, how much profit can be made?” he drooled in an article titled “Urban Renewal Act: Finding a balance between progress and societal needs”.
Is his role to make money for developers or to regulate them?
Stopping the problem at source
Is the lack of profits the main problem facing house buyers in Malaysia? How many abandoned housing projects are there?
What is in place to safeguard house buyers? Why do buyers suffer when developers don’t finish projects? Why does the government continue to abandon the very legitimate interests of homebuyers?
While there are a plethora of problems, for this article, let’s focus on abandoned housing projects and how to stop them at source. The most comprehensive article I have seen on this is a research paper by Khazanah Research Institute or KRI, titled “Abandoned Housing: An Unfinished Dream”.
It’s an ongoing nightmare for hundreds of thousands who dreamed of owning their home. They have to pay for a house they do not have! But the housing ministry does not do a damn thing - nothing - to solve the problem at source.
There are many figures for abandoned projects but I will go by KRI’s which seems to be well-researched from official figures.
It says: “As of 31 October 2024, Malaysia recorded 113 abandoned housing projects, alongside 212 delayed and 382 sick projects. Collectively, these projects represent a gross development value (GDV) of RM113.25 billion.”
It is a hundred-billion-ringgit problem and the reason it is there is entirely due to successive governments bowing to the irrational assertions of property developers who refuse the two methods available and lobby strongly against it.
Solutions
First, build the houses and then sell them - buyers get what they pay for. Second, if it is bought off a plan, ensure the developer is not paid at all until the house is built and a proper certificate of fitness is issued. The developer seeks his own bridging finance.
Under the current system, the buyer takes all the risk. The development is in the hands of the developer and although buyers collectively take the risks, they have no control over the development at all.
Anyone who buys a new home has to go through this process. He buys off a plan. On signing, he pays a 10 percent deposit to the developer from his savings, borrowings from relatives etc. And then he looks for a bank to finance the rest.
The bank then pays out to the developer depending on the percentage of completion, certified by architects paid for and appointed by the developers.
If, for any reason, the final certificate of completion is not given or the construction stops, the only person who bears the brunt of this is the buyer, who loses his house and has to reimburse the bank.
Many developers have run away after having taken money continuously from buyers and then abandoning them, in what is plain outright theft which our housing ministry has refused to correct for well over 60 years. What a crying shame!
Protection for house buyers
Some 22 years ago, I wrote an article in The Edge proposing a solution which was reproduced on the website of the National House Buyers Association, an organisation which to this day actively defends buyers’ rights but often in vain because of an indifferent government.
Some countries, such as Australia, have used it. First, deposits should be put into a trustee account in favour of the developer, which cannot be touched and which bears interest. Similarly for all progress payments.
They will be handed over only on completion by the developer, which puts responsibility on them to finish the project before payment. If, for any reason, the project cannot be completed, the remaining money is returned with the interest earned. Simple.
I calculated in that article that the purchase price for homes would increase due to this by just five percent if the bridging cost was 10 percent. With bridging costs now closer to five percent, the cost of the house will increase only by a mere 2.5 percent, refuting developers’ claims that the costs will be prohibitive.
Spread out over 25-30 years of financing, the monthly cost is small but what a difference it will make! It will totally stop house buyers from becoming responsible for abandoned projects. No more unfinished dreams, no more ongoing nightmares.
Stopping nightmares
At the time I wrote the earlier article 22 years ago to the month, the value of abandoned projects was RM15 billion. Now it is RM113 billion. Almost RM100 billion of buyers’ money would have been saved if the government had taken the appropriate measures. How sad!
Twenty-two years ago I wrote: “The next thing we need is for the authorities to have the courage, the political fortitude, the moral rectitude to resist temptation, and genuine concern for the rakyat to implement this fully and fairly. Is that too much to hope for?”
It was. So Nga, what say you? Do you have the scrotal gumption to do this? Or are you, like the rest of all the housing ministers, just a lackey of housing developers finding opportunities for them? The answer is in your hands - do the right thing! - Mkini
P GUNASEGARAM says money politics is the major source of all our financial and economic problems.
The views expressed here are those of the author/contributor and do not necessarily represent the views of MMKtT.

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