HBA highlights the various existing and emerging issues in the Malaysian housing market for KPKT to overhaul, hopefully in the short term. We need to stop putting profits over people and our planet.
The National House Buyers Association (HBA) is appreciative of the local housing industry’s significant contributions to the country’s economic development and is mindful that home buyers are a core component of the property wheel as they are paying customers. For the housing industry to be sustainable, HBA strongly feels that the interests of both property developers and homebuyers need to be taken into account, especially the latter whose grievances and requests for help often goes unheeded.
HBA would like to congratulate and welcome the newly appointed Minister of Housing and Local Government, YB Menteri Datuk Seri Reezal Merican Naina Merican. Here, we highlight several ongoing issues and problem areas which we hope the new Housing Minister would address during his tenure in office:
1. Do not favour certain property developers
The new Housing Minister should not be a publicity tool for housing developers to exploit during the launching of their property projects and should only support developers who have proven their sense of responsibility and who have impeccable track records. The weight of this action must be considered – By ‘cutting the ribbon’ to launch a new housing project, it means that the Housing Minister has ‘blessed’ and acknowledged that the project will not fail.
2. Provide assistance to victims of abandoned housing projects
He should seriously look into the plight faced by thousands of innocent and unwary homebuyers who find themselves at the mercy of errant developers when the new launch property that they paid for gets abandoned halfway. The new KPKT Minister must ensure that these homebuyers’ legitimate rights as per the Housing Development Act (HDA) are not short-changed.
He should seek immediate solutions to resolve such an unsatisfactory state of affairs and not shirk his duty by exercising and invoking the relevant sections of the legislation to protect naive and innocent buyers. He should remember that buyers of abandoned housing projects will still have to service their housing loans!
There are still hundreds of abandoned housing projects in Malaysia. Check this list of blacklisted property developers before purchasing a house.
3. Introduce forfeiture of land for abandoned projects
In regards to issue 3, the new Housing Minister should adopt pre-emptive measures to ensure project abandonment does not continue to happen under his watch. One way is to lobby for the state authorities to take drastic measures themselves, including forfeiture of land on which abandoned projects are sited so that the projects can be revived and the completed homes can be delivered to their rightful purchasers or owners. He should instruct KPKT to fast track all revival applications to alleviate the sufferings of affected buyers.
4. Get developers to adopt the BTS 10:90 variant
He should ensure that the property industry adopts the Build-Then-Sell (BTS) 10:90 concept − an intermediate variant between the Sell-Then-Build (STB) system and BTS. The laws have already been amended to include the new Schedule I and J in the Sales and Purchase Agreement (SPA) to provide for the BTS 10:90, but it is currently on an optional basis and is not made mandatory for developers.
The new KPKT Minister should see to it that the sales and purchase system adopts the BTS 10:90 model, with the ultimate objective being the complete exclusion of the present-day STB (progressive payment) system. Many countries in the region have already adopted the BTS concept including Singapore, so there is no reason why local developers cannot do likewise.
Under the BTS 10:90 concept, developers may sell their products before they commence construction, given that all the necessary approvals such as the layout plans, building plans and accessory plans have been obtained. Buyers sign the Sales and Purchase Agreement and pay a deposit of 10% of the property’s selling price and will make no more payments until the houses are completed with Certificate of Completion and Compliance (CCC), running water and electricity and the necessary delivery of vacant possession is executed.
The risk of abandoned projects is thus totally removed – If the construction of the houses is disrupted or abandoned, developers will be the ones who bear the brunt. The quality of houses will also improve with the BTS 10:90 concept because developers will have to execute greater care to ensure that these properties are constructed in accordance with the set specifications and proper workmanship so that the finished products are sellable.
The risk faced by developers that the buyer may refuse to complete the sale when the property price has dropped at the time of handover will be negated by forfeiting the initial 10% deposit plus other possible specific performance liabilities.
Find out more here: What is the Build then Sell 10:90 (BTS 10:90) concept and how can it help the housing industry?
5. Strict enforcement of all housing legislations
The new Housing Minister should embark on a campaign of vigorous enforcement to ensure offenders will not get away scot-free. He should demonstrate to industry players that the letters of the law will be enforced without fear or favour and that KPKT means serious business. Errant and unscrupulous developers who create havoc in the housing industry and tarnish the good names of responsible developers should be penalised and made examples of to deter would-be offenders.
Also, he should not propose new laws to be passed by the Parliament for “show” sake and which has been done traditionally whenever there is a new head to helm the Ministry of Housing and Local Government.
6. Establish close working relationships with State and Local Governments
He should see to it that KPKT work closely with the State and local authorities so that problems related to housing can be jointly and speedily resolved. The Compliance Costs borne by developers for property development, which includes premiums for land conversion; development charges; submission fee and upfront deposits to local authorities as well as the cost incurred for SiFus can be reduced so that house prices can correspondingly be brought down as well. Find out how rising Compliance Cost is impacting Housing Affordability in Malaysia.
Moreover, he should provide better support to NGOs. The new Minister should work closely with and provide the relevant non-governmental organisations with greater moral and financial support if required as they can become the Ministry of Housing and Local Government’s source of feedback and inputs for the rakyat’s benefit.
7. Enforcement of Tribunal for Homebuyers Awards & Strata Management Tribunal Awards
The new KPKT Minister should see to it that all Awards meted out by the Tribunal for Homebuyers are promptly complied with by the defaulting developers and any recalcitrant developers will face criminal charges under Section 16AD of the Housing Development (Control and Licensing) Act 1966, and similarly under the Strata Management Act.
Penalties include fines of RM10,000 to RM50,000 or a maximum of two years’ imprisonment. This should ensure developers respect and promptly comply with the ruling(s) of the Tribunal which was established to allow speedier legal redress for aggrieved house buyers.
He should not spare individual directors and/or ‘persons with control” within the development company who should be serving jail sentences (for failure to abide by the Tribunal awards) instead of their wage earners or employees. Similarly, the Awards of the Strata Management Tribunal must be equally obeyed.
8. Sufficient affordable housing for the people
The Minister’s long term aspiration should be the total absence of squatters in the country, which can only be achieved via concerted efforts of both the federal and state governments. He should exert his influence to lobby for such an eventuality.
9. Establishment of an Ombudsman
He should lobby for the establishment of an Ombudsman within the governmental system so that any grievances against any government department can be speedily and effectively attended to. An Ombudsman is normally appointed by and acts on behalf of Parliament, but has a significant degree of independence. The Ombudsman will yield the powers to investigate complaints against the administration (ministry), makes recommendations concerning those complaints and try to have its recommendations adopted by the administration.
10. A proper National Housing Policy
The Housing Minister should get his Ministry to urgently draw up a comprehensive National Housing Policy to provide a firm direction for all matters relating to housing in Malaysia. Factors such as environmental destruction and damage to resources should be addressed and controlled too.
Laws should be strictly enforced to ensure the well-being of the people and future generations. It is vital that infrastructural, industrial, economic and commercial developments are not at the cost of our health.
11. Single umbrella to coordinate distribution and availability of housing
It seems that the local councils and land offices have their own respective directives from their State Government to impose mandatory ‘low, medium and affordable costs’ housing categories. Have they have been overzealous in carrying out the directives? Has anyone made the last count of low-cost units that are available in the market? Has there been an overhang of such properties?
Why isn’t there a ‘single umbrella’ or ‘data bank by the federal government where information can be collected to coordinate the total numbers of such units being built, the location and pricing? The Malaysian government must build the right housing product at the right place, with the right pricing and the right volume.
Alas, I am not the Minister of Housing and can only hope that these issues plaguing the industry are looked into. We need to stop putting profits over people and our planet.
READ PART 2 HERE: Property market issues I would address if I were the Minister of Housing and Local Government (KPKT) – Part 2
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