November 17, 2011

Abandon housing project solution in Malaysia?


In Malaysia, there was once this institution called Danaharta. It was owned by the government. It goes around helping banks with high non-performing loans to manage and finally settled this problem. It was in existence from 1998 to 2005. It was a non-profit organisation with impossible Key Performance Index  and it managed to settled all the problems in the banking industry with an act enacted by Parliament. It saved a banking industry. It was ahead of its time. It was the brainchild of a genius in the government then and it was run by people who were really good at what they were picked for. Now, Danaharta has become Proharta and is a private entity. 

During the existence of Danaharta, it did got involved in abandon housing projects as Danaharta was given the power by Pengurusan Danaharta Nasional Berhad Act 1998 gives it the right to acquire, manage, finance and dispose of the assets and liabilities of a financial institution in trouble. And the bulk of the financial institutions that were in trouble were dealing with abandon housing projects. Although Danaharta was not established to save abandon projects, it became so. During the period of 1998 until nearly 2005 (even later), you can see Danaharta taking the advertisement spaces in major newspaper to sell off properties like factories, commercial properties and even residential. Danaharta was also known to revive abandon housing projects, clean up the management and sell it off too. It did made a tidy sum before closing down shop. 

Was before there was Danaharta, the Bank Negara Malaysia also had an entity called Tabung Projek Perumahan Terbengkalai or now better known as TPPT. It was established in 1990 and ceased in 1992 after reviving 19,000 units of properties. It used a fund under Tabung Pusingan Perumahan Kos Rendah which was provided by Bank Negara Malaysia. Nowadays, TPPT Sdn Bhd has moved away from its office in Bank Negara itself and is another housing developer in Malaysia which used its early days as reviver of abandon housing projects to sell new and completed houses. Here's a link to its website (a bit outdated though) - TPPT Sdn Bhd.


In the housing industry nowadays, since years ago, we seem to be facing the problem of housing development being abandon long before the housing project is completed. It is a bit of a mystery why a law which was enacted since 1970s didn't address the issue of abandon projects. What the law before 2007 had was clauses which ask housing developer to have RM200,000 in its Housing Development Account at any one time and this is the only money supposedly they need to maintain if they want to be in operation. There are penalties which the enforcing authority under Kementerian Perumahan dan Kerajaan Tempatan (KPKT) imposed but are usually paid by the culprits of abandon housing developments without any problem.

The amendments to the Housing Development (Control and Licensing) Act 1966 in 2007 was supposed to add additional penalties and address the issue of abandon housing development. It did stop the fly-by-night establishment of new property developer who circumvent the law by being a bit clever. Here was the scenario in early days of the 2000s. These law benders, some of them have legal background, circumvented the law by building houses without being penalised. The law stated that any person who build more than four (4) houses and sell it for profit is considered to be a housing developer and whatever they do is considered to fall under the housing development law. What these developer did was to sell bungalow plot without any property built on them under one agreement and another agreement is signed for a bungalow to be built on the property. So, they became outside the law before the amendment in 2007 which states that any housing development that KPKT found to be similar to housing development will fall under its purview.

Now, the first bill of the amendments to curb the housing development is on its way through Parliament. The news on 17th November in The Star Property mentioned among other that fines will be increased to RM50,000-00, housing developer need to refund cancelled Sale & Purchase Agreement within 30 days with fine starting from RM250,000-00 and RM5,000-00 for each day of non-compliance and the best of all, the Housing Development Account will now be 3% of the housing project development total cost and not just RM200,000-00. 

I find the new law to be refreshing as it will ensure only housing developer with deep pockets to enter into the business of housing development. There will be complains about certain housing developers to not being able to meet the requirement and we can already hear the Real Estate and Housing Developer Association (REHDA) breathing down the neck of the Minister trying to tweak the Act to suit them but I really hope KPKT and Attorney General office will stand firm on these amendments. National House Buyers Association (HBA) will agree to the amendments as they have been fighting for so long for a solution to the issue of abandon housing projects problem. Here are one of their view on abandon project : Cleaning up abandoned or stalled housing projects

In the meantime, I am also hoping that another effort will be made by the government on all the abandoned housing developments around the Malaysia. The last I heard it was spearheaded by Syarikat Perumahan Negara Berhad (SPNB) which is also tackling the issue of affordable housing. The problem with an institution such as this is when they have to deal with the state governments which sometimes are a bit slow in giving their approval to help the process along. My suggestion is either an institution like Danaharta or TPPT should be given all-encompassing power again or SPNB should be given more power and allocation which can take over and manage the abandon housing development.

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