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Selangor has to clear property overhang
05/01/09 NST

The Selangor government needs to consider the subprime crisis, which resulted from the United States housing boom in the last two decades and which has now triggered the global financial turmoil, and apply the lessons learnt to avert similar problems in the state.

It needs to freeze new commercial and housing developments to mop up the property overhang accumulated in the last 10 years since the 1997 Asian financial crisis.

There are thousands of unoccupied, untenanted and abandoned houses, shops and factories which are a future time bomb for the banks and borrowers now experiencing greater difficulty in recouping or repaying the loans due to the slowdown.

Thousands of property buyers are forced to pay for properties that are almost useless to them. Billions of ringgit worth of houses and shops remain unsold or not rented out while many projects have been abandoned.

With bank loan applications now under stricter processing and the price increase of construction materials hiking up costs, the freeze will have a salutary effect on the economy and possibly spare a crisis in the years ahead.

The government should not equate property development and construction activities to symbolising economic growth and continue to approve projects. Instead, investors could be encouraged with incentives to start industries that can provide employment and income for the people, and which will also spur multiplier effects in urban and rural areas.

The freeze will help the government take stock of the situation and enable the population increase, the newly employed, investors, rural-urban migrants and such to mop up the property overhang.

The freeze will also help revive abandoned projects, and a three- to five-year freeze will be good for the construction industry and buyers to prevent problems and losses.

To help buyers, the government needs to create a mechanism to cut through the legal tangle and wrangle affecting abandoned projects to enable them to restart. The longer the delay, the more problematic abandoned projects become. It must be made an offence for developers who abandon projects, which not only cause hardship to buyers but are also eyesores and health hazards.

Approve only projects deemed essential, such as low cost housing or where development as a catalyst is necessary. Moreover, many developers are slowing down due to the weaker demand.

The government also needs to come up with some reasonable guidelines on the number of shops in proportion to residential units in housing estates. In some areas, the ratio of shops to houses is so large that many shops remain unoccupied even after years, which is a waste of economic resources. It will be better to have limits to enable investors to reap reasonable returns from their commercial properties.

The environment too will be spared by the freeze in the interim as developers are known to clear large areas for earthworks to prepare the sites for development, and this contributes to erosion, silting, warming and river pollution.

The Pakatan Rakyat government acts on the principle that the people's wellbeing comes first, and one of the best ways to do that is to mop up the property overhang.

Another way is to ensure that people are not enticed by glossy brochures and hyped up prospects into buying in these difficult times and regret later.

V. Thomas
Sungai Buloh

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