Foreign worker accommodation opens up new opportunities for developers

Real Estate and Housing Developers’ Association (Rehda) Malaysia president Datuk Soam Heng Choon tells StarBizWeek that the business model for dormitories or accommodation for workers for factories and the manufacturing sector is definitely something that developers are looking at.

THE over-reliance of foreign workers is an issue that Malaysia still grapples with and while that requires time and committed policies to see through a change, an area that is gaining prominence is their accommodation.

There could have been no better time for the issue to erupt but during the initial stages of the Covid-19 outbreak when it peaked last year with allegations of forced labour and subpar accommodation being hurled about.

The hostels for foreign factory workers and construction sites became the centre of attraction for the wrong reasons when several Covid-19 clusters were detected, which again, pinpoints the poor and crowded living conditions that they were facing.

A research project by London-based Modern Slavery and Human Rights Policy and Evidence Centre on “Forced Labour in the Malaysian Medical Gloves Supply Chain during the Covid-19 Pandemic” that was published earlier this month noted that accommodation was a key issue of concern, with more than half of 1, 491 surveyed workers reporting it to be congested, leading to a lack of privacy, insufficient toilets and overheating.

These were also among the reasons why the Human Resources Ministry amended the Workers’ Minimum Standards of Housing and Amenities Act 1990 (Act 446) earlier this year, among which gives powers to the ministry to act against errant employers in accommodation matters.

This gives companies no leeway but to solve the issue of accommodation and the process of rectifying these issues is expected to be a boon for property developers and construction industry players.

For example, Top Glove Corp Bhd said in December 2020 that it spent about RM20mil to buy 100 units of apartments to serve as workers’ hostels and RM50mil on 100 double-storey houses and hostels.

Real Estate and Housing Developers’ Association (Rehda) Malaysia president Datuk Soam Heng Choon tells StarBizWeek that the business model for dormitories or accommodation for workers for factories and the manufacturing sector is definitely something that developers are looking at.

“If there is demand, if there’s money to be made, businesses would definitely go into it. For property developers, this is another area they can look at.

“This is more of a rental model. You have to have deeper pockets to hold it like an investment property, like owning a hotel but of course, this is a long-term rental to factories, ” Soam says.

He notes that it may not be everyone’s cup of tea because the units cannot be sold and one needs to have a strong balance sheet to be able to hold the properties for recurring income.

As for construction sites, Soam says it is rather difficult because the accommodation is always rather temporary.

“The developers cannot be constructing something and then tearing it down two years later.

“What they need to do is a more permanent type of accommodation and run it like a hotel or hostel or a worker’s dormitory like what they call it in Singapore.

“This is a business model that can work, ” he says.

Savills (Malaysia) Sdn Bhd group managing director Datuk Paul Khong (pic below) says with more employers looking into better accommodation, there will be higher rental demand for residential properties suitable for hostel usage in the short and medium term.

He points out that there are rather limited residential properties in the workers’ hostel category available all around and the sector still has a long way to go.

“Various factors are now being reconsidered in determining such accommodation, such as distance, rental rates, commuting time and budget allocated.

“This is basically a trade-off between accommodation rentals and distance or traveling costs.

“It will be a cost-sensitive exercise for the employers as it will result in higher worker costs moving forward, ” he says.

Khong adds that some companies have approached Savills (Malaysia) to help acquire poor or older commercial and industrial properties which they can convert to hostel accommodation at an affordable price, subject to approval from local authorities.

Among areas targeted are those in close proximity to various industrial schemes and older commercial areas.

“They are looking at addressing the workers’ housing issues for employers as a business strategy with investors backing this.

“We expect that there will be more developers or big employers heading to this space to provide workers’ hostels to meet these requirements but with the rising land prices and low rental returns, it will be a long journey ahead.

“If there are cheap land options available, there will be more supply for such development, ” says Khong.

CBRE | WTW group managing director Foo Gee Jen (pic below) concurs that the requirements for proper accommodation is an opportunity that developers can look into.


From a real estate perspective, he believes these will give a boost in terms of accommodation and better land use.

He says there are already several owner-operators or those who specialise in managing hostels and worker accommodation.

“I believe there is a market for this. For a city like Kuala Lumpur, there are still a lot of construction activities going on and rather than housing foreign workers at the sites or shophouses, it’s about time we have a look into the areas where all of them can be centralised in one location.

“There are a lot of haphazard and unhygienic ‘kongsi’ houses at the construction sites.

“Perhaps if somebody can develop...with a high plot ratio allowed by the government, a multi-storey dormitory to have a centralised area, ” says Foo, adding that this is regardless of where the construction site is but then there will be a need to ferry and transport the workers to the site.

He says there is a need for companies to step up in terms of compliance issues, especially when a lot of focus is being placed on the responsible business alliance (RBA).

“These are very basic human rights and needs. Unfortunately, we are still lacking in terms of providing very basic needs, not only for foreign workers, even local workers.

“We have to look at the totality, even learning from the mistakes Singapore made, where the biggest cluster of Covid-19 came from a very systematic foreign worker quarters, ” he says.

Whole Gain Sdn Bhd marketing director Shaun Chew says the spread of Covid-19 in the manufacturing and construction industries may be due to the inappropriate or cramped accommodation that foreign workers are housed in.

Whole Gain is a firm that deals with modular construction systems (MCS) where some 85% of a unit or house’s components are manufactured or constructed in a factory, ready with the mechanical and electrical components before it is transferred to the site to be installed.

“We’re definitely seeing a stronger demand now but we can’t really do much due to the enhanced movement control order (EMCO) now.

“We’re cooperating with some companies to look into this and we want to build more and there are a few places we’ve identified, especially in the matured industrial areas, ” he says.

Chew adds that their concept dormitory will allow the foreign workers to stay within the community and their concept of a central kitchen which can cater for daily meals leads to a healthier lifestyle and a more hygienic environment.

Whole Gain will also be working on a dormitory in Klang to accommodate 12, 576 people, pending signatures for the necessary approvals.

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 46
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

Next In Business News

Ringgit opens flat as investors stay on the sidelines
Returning crowds bode well for Resorts World Genting
Quick take: Unisem shares drop on earnings miss
FBM KLCI slightly higher as consolidation continues
Quick take: SCIB shares tumble 23% on suspension risk
Favelle Favco's latest job wins point to improved performance
IT and tech galore in Bukit Jalil
Trading ideas: Yinson, Favelle Favco, Deleum, Advancecon
Homing in on unresolved issues
Providing support for economic growth

Others Also Read