Abandoned project woes

05/06/2006 The Star

ONE of the greatest injustices is to end up the victim of an abandoned housing project.
It is a traumatic experience having to endure a situation where you place your entire savings to own a home, only to discover the house never gets completed and, worse, you still have to service the loan.

Statistics from the Housing and Local Government Ministry for last year show that almost 60,000 Malaysians were victims of over 260 abandoned housing projects in Peninsular Malaysia involving the sum of RM8bil!

Sadly, the majority of those who become victims are from the lower income brackets. It is a known fact that developers are not interested in low- and low-medium-cost housing projects because they cannot make huge profits from them.

One-third of the 60,000 affected housebuyers are from Selangor, and last week, Mentri Besar Datuk Seri Dr Mohamad Khir Toyo took banks to task for releasing progressive payments without checking the status of the projects.

Dr Khir said it was irresponsible on the part of banks to release 80% of the loan to errant developers when the projects were only about 20% complete.

Dr Khir ought to know the frustration as he once remarked that he too was a victim of a stalled housing project in Sepang a few years ago.

Dr Khir said rogue developers would “disappear into thin air” the minute they get a hefty sum from the banks and the housebuyers are left in a lurch, ending up as liability to the banks.

Whether we realise it or not, all Malaysian taxpayers, including you and me, end up “victims” each time a housing project becomes abandoned. How does this affect the taxpayers?

According to Housebuyers Association of Malaysia secretary-general Chang Kim Loong, the taxpayers' money is used to pay to revive abandoned projects and, so far, the Government has allocated RM2bil to revive such projects.

“The man-in-the-street is probably not aware that each time Syarikat Perumahan Negara Bhd revives an abandoned project, public funds are utilised, which means people like you and I are actually involved in bailing out stalled projects,” he said.

More worrying is that the number of abandoned projects has increased by 14% based on statistics for the last two years. In 2004, there were 227 abandoned projects involving 75,000 units while last year's figures were 261 projects involving 88,000 units.

Perhaps the Housing Ministry should list errant developers and their directors on its website so that the public can be wary of companies and individuals who have a reputation for taking the housebuyers for a ride.

According to Chang, the main cause for abandoned housing projects is poor enforcement from the authorities like the Housing and Local Government's Enforcement Division.

He said there are adequate provisions to protect buyers under the Housing Development Act, such as Sections 7, 10, 11 and 12, but, unfortunately, these provisions are not used.

The best solution to overcome abandoned housing projects as experienced in the past is to go with the build-and-then-sell concept, of which the 90:10 proposal is worth consideration.

Under this arrangement, buyers only fork out 10% downpayment during booking and pay the remaining 90% when the house is complete with keys available for vacant possession and a permanent certificate of fitness issued.

This will do away with rogue developers and end the anxiety and suffering of housebuyers and also ensure taxpayers do not have to “fund” abandoned housing projects in future.