Hope for abandoned projects
21/10/2003 City & Country By Hazatul Syima Haron

After 17 long years of waiting, 62 buyers of the 1-storey terraced homes in Taman Bidor Intan in Bidor, Perak, finally moved into their "new" homes in May last year.

While most of the abandoned projects revived or being revived by Syarikat Perumahan Negara Bhd (SPNB) range from 10 to 15 years old, Taman Bidor Intan takes the cake. Not surprisingly, it was among the earliest projects to be revived by the company.

Second Finance Minister Datuk Dr Jamaludin Jarjis says: "Some buyers had only one child or were still working when they bought the homes. Now, when they are finally able to move in, some of them already have five children or have retired or their spouses have passed away."

Efforts to revive the abandoned projects got off to a slow start because SPNB had to negotiate with the developers, creditors and financial institutions involved, explains Jamaludin.

This, however, is expected to be a thing of the past now that the government has given Pengurusan Danaharta Nasional Bhd the authority to move into the picture and take over the debts incurred by the developers of the abandoned projects.

The Ministry of Housing and Local Government has identified a total of 514 abandoned housing projects nationwide. Of these, 70 were assigned to SPNB in 2001 to be revived. The number grew to 165, involving 47,724 units with a total value of RM4.37 billion as at July 31.

Of the 165 projects under SPNB's purview, 26 are in Perak, 25 in Selangor, one in Perlis, two in Labuan and three in Melaka (see Table 1).

SPNB had completed 19 of the 165 projects as at Sept 30 (see Table 2). Among them are Taman Wahida in Maran (Pahang), Taman Yew Lean in Jelutong (Penang), Bandar Sri Aman in Machang (Kelantan), Taman Sri Idaman in Kangar (Perlis), Taman Dalma in Semenyih (Selangor) and Kondominium Pelangi Indah in Kuala Lumpur (see Table 3).

A development project is considered abandoned if work at the site has started and halted with sales of more than half of the total units offered. If no work has started on the site, the project is not considered abandoned. So, the project is not deemed abandoned if only 30 per cent of the units have been sold.

SPNB was established in 1997 by the government as its property development arm under the Minister of Finance Inc (see story on Page 10). Its operations started in 1998 with the aim to provide Malaysians with affordable homes. It has since gone on to build government quarters and revive abandoned projects.

The company has generally kept a low profile but shot into the limelight recently with the proposal in Budget 2004 that developers could choose to build their quota of low-cost homes or surrender their obligation to SPNB. However, they will be required to pay a contribution to the government, the quantum of which is now being discussed by the Ministry of Housing and Local Government in consultation with the local property development fraternity.

In the Budget proposal, state governments were also requested to do away with land premiums for low-cost housing projects. All utility companies providing facilities like electricity, water and telecommunications are also requested to charge only basic cost, minus the margins.

On top of that, it has been proposed that SPNB develops a showcase of affordable housing on a 1,000-acre tract on the Rubber Research Institute of Malaysia land in Sungai Buloh, Selangor.

Double whammy

Without any doubt, abandoned housing projects burden buyers immensely with a double blow to their finances - they have to service the mortgage loans and fork out rents for a roof over their heads.

SPNB is working overtime to eradicate the problem "once and for all". Once an abandoned project is revived and completed, the units are handed over to buyers without any added cost.

This is possible as SPNB and the government have worked out a formula whereby the latter will subsidise certain expenses incurred for the benefit of the "victims".

SPNB will honour the sales and purchase agreement signed between the buyers and troubled developers, including all the specifications and finishing stipulated. "We are not taking care of the developer, its creditors or financial institutions that issued the bridging loans, but the buyers who had been victimised," stresses SPNB managing director Datuk Mohd Zaihan Mohd Zain.

The 'implementor'

As of January last year, the Finance Ministry had allocated RM300 million to SPNB to revive abandoned housing projects. These range from low to medium-cost homes, with 47,724 buyers from all strata of society.

The projects had been abandoned at various development stages, ranging from 20 to 95 per cent completed. Thus, the monthly mortgage repayment required of the buyers differs.

SPNB, the Second Finance Minister explains, does not pick and choose which abandoned project to revive. Rather, SPNB acts as the "implementor" and receives the list of abandoned housing projects to be revived from the Ministry of Housing and Local Government, which also sets the criteria for selection.

Apparently, once a buyer files a complaint with the ministry, its enforcement department will launch an investigation and ascertain whether the project is to be revived.

SPNB also does not have the power to take action against the errant developers - this comes under the purview of the housing ministry. Under the Housing Developer Act (Control and License) 1966, the housing ministry may take action against errant developers by blacklisting them and their directors.

In studies conducted by SPNB, the factors that contribute to the abandonment of a development are: the project is not viable; proceeds from the buyers and end-financiers not channelled into the project; and the developer's failure to raise sufficient working capital.

Jamaludin says the number of abandoned housing projects has fallen since the housing ministry made it compulsory in 1991 for developers to open an account (Housing Development Account) with a bank or financial institution specifically for each project. Still, several projects ran into trouble because of sales of less than 30 per cent.

Mohd Zaihan says each abandoned housing project has its own set of problems that requires a different approach and rehabilitation scheme. The time taken to revive and rehabilitate each project depends on the approach and scheme taken. And SPNB's target? To complete the rehabilitation of all the 165 projects under its purview by 2006.