Causes of abandoned projects
 13/05/2006 NST

A housing project is classified as "abandoned" by the Ministry of Housing and Local Government (MHLG) when there is no activity at the project site, continuously, for more than six months after the expected date of delivery of vacant possession.

This is based on the date of the first Sale and Purchase Agreement (SPA) signed between the developer and a purchaser.

A project is also classified as abandoned if, within this six­month period, the developer has been wound-up and the company taken over by an official receiver or private liquidator recognised or affirmed by the Housing Controller, who is the Secretary-General of MHLG.

Between 1990 and December 2005, a total of 261 housing projects were identified as abandoned by MHLG. These projects totalled 88,410 units, involving 58,685 house buyers for proper­ties valued at a total of RM8.04 billion.

Of these, 87 projects were revived and completed by white knights and another six by Syarikat Perumahan Negara Bhd (SPNB). Of the 168 remaining, 149 projects were classified as having the potential to be revived. These contained 63,894 units involving 42,706 buyers and a total sales value of RM5.4 billion.

Another 10 projects housing 4,191 units, 2,074 buyers and RM426.2 million in sales value have been taken over by new developers, while nine others involving 2,866 units, 1,364 buyers and RM 335.29 million in sales value were classified as "not viable for revival".

Of the total 70,960 units abandoned in the 168 projects, 31,276 are high-cost houses, 18,731 medium-cost and 20,953 low-cost units. The total number of abandoned projects makes up only 1.3 per cent of the 13,286 projects implemented between 1990 and December last year.

It must be noted that the developers that abandoned the 261 projects between 1990 and December 2005 had their licences issued before the housing law was amended on Dec 1, 2002.

There are a number of factors behind the abandonment of a housing project. One is the financial problem of a developer caused by incidences such as the 1997-98 economic crisis.

Poor marketing and sales strategies is another reason; so too are technical problems faced during construction; as well as problems caused by compensation demanded by squatters for resettlement.

Crisis within the development company, including disputes between shareholders or embezzlement of progress payment collections, problems involving contractors and even disagreements with landowners are more reasons for abandoned housing projects.

The MHLG's findings have shown that 118 or 70 per cent of the 168 projects abandoned. were due to the financial problems of developers. Another 23 (14 per cent) arose from poor marketing and sales strategies while 27 (16 per cent) failed over problems arising from squatter resettlement, poor company management and disputes between developers and contractors or with landowners.