Time for purchasers’ indemnity insurance
By Salleh Buang
are brightening up in downtown Alor Setar. Everyone is looking forward
excitedly to seeing it attain city status by next year.
Several main roads in the town centre have been spruced up. At night, some
sections are pretty-well lit. Pekan Rabu now looks pretty smart and chic.
Further down the same road, the Setar Walk Project, modeled on Kuala
Lumpur’s Bintang Walk, has already been completed. Unfortunately, business
operations have not started yet, except for a solitary stall located next
to the Holiday Villa hotel.
Sadly, as you leave the town centre and drive into the suburbs, you have
to prepare yourself for a less pleasant sight. I came across one such
“zone of sorrow” recently. I made the trip that day to see for myself if
the news report I read a couple of days previously was true.
According to the article, some 200 purchasers of phase two of Taman Seri
Abadi, a housing project at Jalan Kuala Kedah, are now facing a bleak and
If you have ever been to Langkawi by taking the ferry at Kuala Kedah, you
would have travelled along this road. The road is now nicely paved and lit
(with expensive antique-looking street lamps, some say imported from
abroad) all the way from Alor Setar to the jetty at Kuala Kedah, a
distance of some 7km.
The housing project, located off this road, is 90 per cent completed, but
has been abandoned for a couple of years. The reason is lack of money,
rather than lack of commitment on the part of the developer.
The houses (all single-storey terraces) built in this phase had been sold
to purchasers for between RM46,000 and RM58,000. Sale and purchase
agreements were mostly executed towards the end of 1997, which means that
completion was to have been somewhere towards the end of 1999 or at the
latest, early 2000.
Although this case has now caught the interest of the media, I am not sure
if it has caught the attention of the Housing Ministry. In the
circumstances, I am not optimistic if help can come soon, although I pray
and hope that help will finally be extended to the purchasers. After all,
the project is almost complete and it would not pose too much of a problem
for the relevant authorities to finish the remaining 10 per cent of the
Taking the larger picture and looking at many other similar cases of
abandoned projects nationwide, I would like to pose this question.
Couldn’t we implement some kind of compulsory indemnity scheme for
purchasers? Call it the “Purchasers’ Indemnity Scheme” or whatever name
you may think more appropriate, but the objective is to make it compulsory
for a housing developer to take out an insurance policy to provide
adequate protection for its purchasers in the event of non-completion
(such as the one in the Kuala Kedah case) or abandonment. When that
contingency happens, the insurance company forks out the money for the
project to be completed.
Before you dismiss the idea summarily, let us look at the situation in
Under its Home Building Contracts Act, “builders’ (in our context,
developers) are required to take out insurance cover before they can apply
for a “building licence” (in our context, a developer’s licence).
Under a scheme called the “home indemnity insurance” (in Malaysia, we
might wish to call it the purchasers’ indemnity insurance), protection is
afforded to home owners against financial loss if a builder is unable to
complete building work or if he cannot meet a valid claim by the
purchasers because of “disappearance, death or insolvency”.
It would be naive to think that we can just transplant a foreign law over
here and expect it to solve all our peculiar local problems.
Adaptation and modification must necessarily be carried out to suit local
conditions, but at least we will be moving in the right direction. As
matters now stand, we have had problems of abandoned housing projects for
decades but we are nowhere near solving the root of the problem. I would
like to hear what the insurance industry has to say, if such a law can be
put in place.