Caught with abandoned or sick project

  • Business
  • Saturday, 16 Nov 2019

MEI, in her late 50s, wants to buy a flat. She is currently renting. During her early 30s, she had worked for a well-known developer who was building a RM60,000 apartment unit. Her manager warned her against buying it.

Mei went ahead with the purchase. Although the apartment block was completed, there was no proper road access and over time, drug addicts used the place as their hang-out.

While still saddled with her housing loan, she quit her job to study and fell behind on her monthly loan repayments. The bank, located about 200m from her rented place, sent letters to pursue the matter. Mei ignored all of them. She moved to another part of the Klang Valley to escape the legal pursuit.

“I became scared every time I heard the postman’s motorbike, ” she said.

She was advised to sort out the matter with the bank. Mei’s reply: “If I know I cannot pay, what’s the point of seeing them?”

Years later, Mei lost her handbag to a snatch theft. She applied for a new identity card, and listed her current rented place.

Now working, she was puzzled when she could not retrieve her salary from a bank. Within weeks, the bank that gave her that housing loan more than a decade ago caught up with her. She also discovered she was declared a bankrupt.

There are a few perspectives to the above true story.

Although this was, at that time, a well-known developer, it was grossly irresponsible to put that project on sale. Such a project should not have been put on sale in the first place and a manager warning a staff not to buy it is a red flag.

It is such developers who give the industry a bad name.

Secondly, quitting her job despite a loan commitment suggests a lack of financial planning. Pretending the loan does not exist is escapism.

Today, some two decades later, there are many like Mei running around; there are also irresponsible developers around.Blacklisted developers

The Housing and Local Government Ministry posts a list of developers blacklisted for various reasons on its website on a consistent basis.

As at Nov 1,2019, there were about 100 unlicensed private developers with problematic projects compared with nearly 200 in 2012. Attempts to call the department for further clarification with regards ringgit value were unsuccessful.

The Housing and Local Government Ministry website also offers a separate list of 188 private developers with about 200 abandoned projects, six of which have been abandoned around the period of the 1997/98 Asian Financial Crisis.

Abandoned projects are found in 11 out of 13 states. None were listed under Perlis, Sabah and Sarawak but this does not mean there are none there.

Selangor has the highest number of abandoned projects numbering 75. Among these 188 developers, 47 of the projects were abandoned between 2011 and 2014 when there was a dizzying run-up in property prices.

Projects continued to be abandoned up to March 2019 as seen in the list.No developer charged

Although there are legal provisions effective from June 1,2015, the National Housing Department’s corporate department said “no developer has been charged for abandoning a project.”

“Why are directors of abandoned housing projects not prosecuted?” the National House Buyers Association (HBA) honorary secretary-general Datuk Chang Kim Loong asks.

He says the Housing and Local Government Ministry is far from “toothless”. Indeed, it is equipped with all the tools in the form of legislations and rules under the Housing Development (Control & Licensing) Act, Housing Development Regulations, Housing Development (project acc) Statutory Sales & Purchase Agreements in Schedule G, H, I & J.

Chang says the government must treat the building industry like any other business which is not excluded from business risks.

“No amount of legislation can guarantee the success of any housing project; or, for that matter, any business venture. Since the success or failure of any housing project cannot be guaranteed by any party, it is only fair the government institute a system that totally, or to a large extend, insulates house buyers from such business risks/uncertainties, ” Chang says.

Under a Build Then Sell 10:90 (BTS: 10:90) system, a buyer pays a 10% deposit and pays nothing until completion, and certification that it is fit for occupation, with individual title deed, and water and electricity connected.

“Buyers face serious risks when they make purchases under the prevailing Sell Then Built system.

“Even car buyers have more protection than house buyers. Has anyone ever heard of a person who bought a car and never got the car?” he says.

He questions why abandoned private housing projects still littering the skyline of the peninsula and what is the situation over in Sabah and Sarawak.

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