The Housing and Local Government Ministry recently blacklisted 109 property developers and their boards of directors, for failing to adhere to regulations for their projects. But many say simply blacklisting errant developers doesn’t truly address the problem of abandoned housing projects. On this episode of #ConsiderThis Melisa Idris speaks with Theebalakshmi Kunasekaran, Research Associate at Khazanah Research Institute, where her research interests include housing, urban studies and regional development.
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00:00hello and good evening i'm melissa idris welcome to consider this this is the show where we want
00:15you to consider and then reconsider what you know of the news of the day a home is the biggest
00:21investment most malaysians will ever make but for thousands of home buyers it has become a financial
00:27and emotional burden their dream homes are now abandoned construction sites the housing and local
00:33government ministry recently blacklisted 109 property developers and their board of directors
00:38for failing to adhere to regulations for their projects but many say this is too little too late
00:45so why is it that so many housing projects fall apart and why are home buyers the ones left to pay
00:52the price so joining me now to explore this further is tiba lakshmi kunasekharan who is a research
00:58associate at kazana research institute where her research interests include housing urban studies
01:04and regional development tiba thank you for being on the show with me i appreciate your time
01:09how big is malaysia's abandoned housing problem currently i'm just wondering uh what the numbers
01:15are telling us about the scale uh and persistence of this issue thank you thank you marissa for the
01:22opportunity um abandoned housing problem is still a major and uh persistent issue in the country like
01:30if we see in october 2024 there were about 113 projects that were declared abandoned and these projects are
01:37with proper licensing and the latest figure as of march 2025 there is a slight reduction to 109
01:45projects um although they still involve like 29 000 units and nearly 16 000 buyers but if we add up
01:52unlicensed projects that that is about 172 projects so total in total we have about like 281 projects
02:01involving more than 40 000 units and nearly 21 560 buyers so we saw a slight reduction is in the number of
02:12projects um because this is mainly due to active government intervention right through the task force
02:18on sick and abandoned private housing uh project tfst that was established in 2022 and despite this
02:27progress the issue still remains deeply concerning because many buyers are not waiting like for few
02:33years they are buyers who are waiting for decades for a solution that are that will be in favor for them
02:40like um and currently we have like 13 projects with static status which means there are no efforts for
02:46rehabilitations that is taking place and this involves like another 1500 buyers and there's like no progress
02:54towards a solution and the the statistics also show that even more developed economically developed states
03:01like slango and joho are facing these abandoned uh housing problems and we also see cases rising in states
03:09like plantan and pranganu with more than 80 percent of buyers are affected which means right 80 percent
03:16of the units are sold prior for prior to abandonment so this highlights the severity of this uh issue in
03:24the housing market i mean i think many house buyers assume that property developers are always financially
03:31sound and they are or that this industry is very well regulated so people what is the main reason that
03:38many developers have abandoned via these projects okay um some of the primary causes right include
03:46developers mismanagement and also financial constraints like mismanagement from developer sites uh this
03:53includes like lack of proper feasibility studies being done to uh assess uh market uh demand local market
04:01demand and identify the suitable housing development projects so when there's lack of proper feasibility studies
04:07developers may choose an unsuitable project and that fails to meet buyers demand and then when there's
04:14also like poor marketing strategies when this happens developer unable to attract buyers which means they cannot
04:21generate sufficient cash flow because developers rely heavily on buyers fund or unit sales to finance the
04:29ongoing construction so when project is not viable there's no demand no cash flow then which leads to financial
04:36financial problem and also increases uh the risk of uh project delays and abandonment and then there are also
04:42factors beyond market demand like economic conditions we saw during covid 19 right there were many
04:49construction projects that were stalled and delayed and then some studies have also highlighted issues with
04:55lack of government enforcement and monitoring like i said there are 172 abandoned projects with unlicensed
05:02developers and this raises a critical question like how are these projects were approved at the first place and it's
05:09quite worrying it still involves like 12 000 units uh and 5 000 buyers so we really need a stricter
05:16licensing requirements for developers and more frequent monitoring um from the government's side also
05:23okay um what about the the home buyers so when a project gets abandoned we see buyers left in limbo right
05:32they end up paying loans for houses that they never receive how would you characterize how buyers are protected
05:41from these commercial risks that the developers take on because if developers are relying a hundred percent on
05:47the number of units they sell then are buyers adequately protected from the the lack the risk that developers um
05:57take on okay so actually buyers are somewhat protected under the housing development act 1966 which
06:06governs the licensing and control of housing developers and then they also have a tribunal for whom buyers
06:12claims where affected buyers can claim for damages or compensations when developers fail to provide
06:18houses as promised in the spa the sales and purchase agreement but when it comes to abandoned projects
06:25rights these protections fall short the biggest burden like you said it falls on the buyers like especially
06:31those who have signed the spa um so generally housing transaction involves three parties like the buyers
06:38the banks the banks and developers so as the end financer the banks will go after the buyers to collect the monthly
06:44mortgages from buyers who have not seen or received their home yet and meanwhile developers may face penalties
06:53and blacklisted and if bankruptcy is a reason for their project abandonment then there is nothing much that
07:00we can do and um there are situations where buyers can terminate their spa under certain conditions
07:07like when they see developers are refusing to carry out construction projects for more than six months
07:13but then this requires um bank consent letter and then housing controller to certify that okay this
07:21thing is happening construction is not moving so it involves a lot of lengthy and a lot of documentation
07:26processes for buyers to follow up so it's still like as you said the biggest burden is on the buyers
07:33they have to suffer double burden like pay the rent that they live in then pay the mortgages for the
07:40house that they don't have access to and on top of this all the emotional distress and the taxing
07:46legal processes add up to their cost time and energy and even if a project enters rehabilitation right
07:54the process is often complex and uncertain right well what do you mean by that earlier you mentioned
08:00that there were some projects that were of static status now i understand that sometimes maybe as a
08:07last last resort the government steps in to help revive these abandoned projects but why did you say
08:13that uh that rehabilitation is a complex process okay um not all projects both rehabilitation like it's a
08:20complex process like involving many stakeholders like developers financiers contractors technical
08:27agencies and also government authorities so some of the critical consideration that they take into
08:33place when they want to consider rehabilitation is like number of units sold existing buyers interest and
08:40when they want to proceed with the project what is the likelihood of buyer take up upon completion of
08:45the project so some of the challenges that hinders this uh project rehabilitation it uh it can be lack of
08:53um collaboration between stakeholders um resubmission of project approvals and documents and requires a lot of
09:01um negotiation where it will be very hard to achieve a compromise between the buyers and also rehabilitation
09:09parties sometimes plans can deviate from original um plan in some cases um there are projects where have been
09:17repurposed into commercial project from residential converted into commercial and then
09:22some some some projects where buyers were able to get back their deposits there are situations where homes
09:30are rebuilt but with reduce sizes or change features because uh when rehabilitation happens the costs will
09:38increase so they have to like meet up their costs and also the price that they paid right so this requires like
09:45buyers either accepting less or paying more than what was initially promised so how would you
09:52you uh have having said what you said and and us um knowing your research what do you see as the biggest
10:00policy gaps or um regulatory blind spots when it comes to abandoned housing why what's missing that has allowed
10:10this problem to persist today okay in um so i would say the major policy or issue actually lies within the nature of our
10:20housing delivery system which is the seldom build system under stb um houses are sold first before
10:28construction begins right so developers rely on buyers cash flow then their own capital to finance their the
10:35ongoing construction although this system has an advantage because it allows more developers with smaller
10:42capital funds and other smaller players to participate in the housing supply chain but then this system exposes
10:49significant risk uh to the buyers the commercial risk that we have said um in the event of poor financial
10:56management insufficient um project planning or broader economic downturns buyers will then face the
11:03possibility of being left with unfinished home despite servicing their housing loan like why should buyers suffer
11:12for placing the trust on developers hoping that they will get uh completed projects right getting
11:19quality homes is one thing but at least giving them a completed home right um so i would say like um
11:27we should migrate to build and sell system which will be a good prevention and protection for home buyers
11:35it can safeguard home buyers interest where developers will then finance the construction up front and then sell the
11:43houses after the houses after completed it can lower the risk also and also ensures um construction with good quality
11:50quality because developers will then be competitive to attract buyers to attract demand and then when your products
11:57are of good quality your unit sales are guaranteed right so we and other this along with sell a build and that sell system we also need like
12:05like stricter government enforcement more monitoring on um licensing and then ensuring developers have um strong financial record and and they have robust risk management
12:21um only projects with this that should be granted approval and then we can also prevent um such abandonment cases cases happening
12:27yeah tiba thank you so much for sharing some of your um insights in your work in your research appreciate your time
12:39tiba laksnikunasekaram there from kasana research institute we're going to take a quick break here and consider this and we'll be back with more stay tuned
12:45stay tuned