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Fairness for house buyers
03/12/2010 The Star By LESTER KONG

The local government and Housing Ministry are pursuing ways to reduce the number of abandoned projects and to create a mechanism for housing delivery.

The Local Government and Housing Ministry has emb arked on creating a new mechanism for housing delivery to ensure the fair treatment of house buyers.

It is also pursuing various means to reduce the number of abandoned housing projects that continue to plague house buyers and their banks.

“The Ministry holds the main role as the facilitator or the mediator to settle and supervise efforts in rehabilitating and negotiating between all interested parties.

“They include the house buyers, land owners, developers and liquidators in the objective of finding the best way forward to rehabilitate abandoned housing projects,” said Minister Datuk Seri Kong Cho Ha in an interview.

At the moment, he said the Ministry had identified 30,567 house buyers that are in need of help to revive the properties that they have paid for, either in terms of down payment or were currently servicing the interest of their loans.

The number makes up the buyers of 136 housing projects that have been currently classified by the Ministry as abandoned throughout the country.

“It must be noted that these 136 projects account for about less than 2% of the total housing development in the country.

“Nonetheless the stress impact of it upon the people and the national economy runs deep,” he said.

There were three main types of housing projects that faced problems: ‘Delayed’, ‘Ailing’ and ‘Aban doned’.

According to Kong, housing projects that have been placed in the Delayed category were often buildings that were behind the schedule that was first presented when the developer was applying for the Housing Developers License.

These delays usually fall between 10-30% of the schedule as stipulated in the Sale and Purchase Agreement (S&P).

‘Ailing’ housing projects often face issues such as land problems or disputes, human resource problems and a disturbance in the sourcing of building materials for the project.

These projects often fall more than 30% behind schedule.

‘Abandoned’ projects are those that are not completed within the stipulated period for the first Sale and Purchase Agreement (S&P).

“The S&P is to protect house buyers by ensuring the developers keep to the time frame for delivery of the unit to the buyer. Normal properties such as houses with individual titles must be delivered within 24 months of signing the S&P and 36 months for subdivided buildings with strata titles,” he said.

Abandoned projects fall under three categories:

> Projects that had seen no substantial activity on-site for six consecutive months

> Projects involved in a winding-up petition registered at the High Court under Section 218 of the Companies Act, or

> The developer informing the controller in writing of his inability to complete the project or the project has been certified to be abandoned by the Minister under Section 11(1)(ca) of Act5 118.

According to Kong, there are various factors that cause housing projects to be abandoned such as cash flow problems, inaccurate market research and study, technical problems and mismanagement in the company.

The Ministry as the main mediating body has successfully revived through various means 12 abandoned housing project in the country out of a total of 148 abandoned projects throughout the country.

Another 46 housing projects were in various stages of being revived, he added.

He added that the revival of housing projects that the Ministry was helping to mediate did not involve any Government expenditure.

“The government is pursuing multiple ways in a citizen-centric approach to resolve the issue of housing projects that fail to complete.

One of the recent steps taken by the Government in its efforts to help revive these housing projects was to establish the Special Task Force (STF) to Revive Abandoned Housing Pro jects.

“The STF aims to draw together various sectors of the housing industry to generate ideas, approaches and strategies that will hopefully accomplish quantum leap improvements of the local housing delivery system,” Kong said.

He said various players of the housing development industry had to get involved to help revive abandoned projects.

“The Government is not the sole agency that is needed to help resolve abandoned housing issues.

“It is a long process to resolve abandoned housing projects because it involves so many players of the industry,” he said.

Other players included the developers, the buyers, the banks and financial institutions, which made up the core players of the issue.

“All of them are needed in untangling the legal matters that arise from even a single abandoned housing project.

“It takes a lot of effort for the Ministry to be the mediating body between all these players. When it comes to legal battles between the various parties, it also involves costs in a long drawn out process,” he said.

Sometimes, the land owners will also be needed to help bring resolution to why the project has become abandoned, he said.

“It takes a lot of compromise and give-and-take between the parties to successfully revive a project,” he said.

For example, Kong said the Ministry’s task force had to convince house buyers in certain projects not to pursue with their claims for late delivery.

When a project is not delivered on schedule, the house buyers typically could claim a certain amount from the developer to compensate for the housing loan repayments that they had paid without being delivered the property.

He said in other instances, the banks were also persuaded to waive the interest charges for loans that were taken out for abandoned projects.

‘White knights’ or a new and more financially-capable developer would be the main method of ensuring that the abandoned project gets built

to completion but they would also need to be convinced of the project’s viability and may make changes to the building plans and its infrastructure, Kong said.

The Ministry also studying various ways to improve the housing delivery system.

The new mechanism for housing delivery is an adjustment in the Schedule of Payment of Purchase Price which details the items of installment and their percentage and amount payable, said Kong.

“Under this schedule of payment buyers have to pay 80% of the purchase price before the completion of their homes,” Kong pointed out.

He said under the new schedule, the property developer would not find it worth their while to abandon a nearly completed project as there would still be a substantial payment to be received, unlike under the current schedule.


> Upon signing of SPA: 10% Progressively payment for foundation: 10%

> Structural frame work: 15%

> Walls with doors and window frames placed in position: 10%

> Roofing, electrical wiring, plumbing (without fittings) gas piping and internal trunking and cabling: 10%

> Internal and external finishes including wall finishes: 10%

> Sewerage works serving building: 5%

> Drains: 5%

> Roads: 5%


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