A STUDY OF THE CAUSES AND EFFECTS OF

ABANDONED RESIDENTIAL PROJECTS IN

MALAYSIA

DHARMASEGARAN A/L K. NAGAMANY

UNIVERSITI TUN HUSSEIN ONN MALAYSIA

A STUDY OF THE CAUSES AND EFFECTS OF ABANDONED

RESIDENTIAL PORJECTS IN MALAYSIA

DHARMASEGARAN A/L K. NAGAMANY

A thesis submitted in

fulfillment of the requirement for the award of the

Degree of Master of Science in Real Estate and Facilities Management

Faculty of Technology Management and Business

Universiti Tun Hussein Onn Malaysia

JUNE 2016

iii

For my beloved wife and children

iv

ACKNOWLEDGEMENT

This thesis is dedicated to my wife and children, especially my wife, who has

constantly encouraged me to carry out this study due to my own background

knowledge in this field of study, as a contribution and eye-opener to those

unfortunately affected by abandonment and others in our society. Without their love,

support and understanding, it would have been a difficult task to complete this

course. I would also like to thank my late parents who had always placed the utmost

importance on education as I would not be where I am today if not for them. The

invaluable knowledge and experience gained was made possible by the dedicated

supervisor of this thesis. A word of thanks also goes to the ever-helpful staff of

UTHM. The cooperation of the national regulatory bodies involved in the property

industry and the respondents where this study was carried out is also very much

appreciated. They have made this study a memorable and pleasurable one.

v

ABSTRACT

The ever increasing demand for property has brought about numerous problems

involving the stakeholders in the property industry, resulting in the widespread

abandonment of residential projects in the country. The purpose of this study is to

reveal the causes relating to the phenomenon of abandoned residential projects in a

structured manner and its effects from a social, economic and environmental

perspective. A preliminary research on literature review using content analysis

identified the key stakeholders involved. A quantitative research methodology was

conducted in the collection of data through a well-designed questionnaire which was

structured based on literature review and preliminary interviews and discussions with

10 key stakeholders of the property industry. A total of 52 respondents representing

developers, contractors, consultants, REHDA, HBA, Abandoned Property Owners

Association and banks participated in the survey. Data was analysed using

descriptive statistics whereby the mean scores were obtained. The findings conclude

that the main root causes of abandoned residential projects in Malaysia are financial

closely followed by administrative/strategy and policy factors. They also confirm

that the effects are mainly social and economic with some environmental effects;

sub-categorized as financial, administrative and policy perspectives. An analytical

framework in the form of a Fishbone Diagram illustrates the causes and effects of

abandonment categorized under the different perspectives with respect to the relevant

key stakeholders. The findings of this research contribute valuable knowledge and

solutions to the key stakeholders enabling them in making informed choices and

decisions in avoiding future entrapment.

vi

ABSTRAK

Permintaan untuk hartanah yang sentiasa meningkat telah banyak membawa masalah

yang melibatkan pemegang taruh dalam industri hartanah hingga mengakibatkan

projek perumahan terbengkalai secara berleluasa di negara ini. Tujuan kajian ini

adalah untuk mengkaji dan mendedahkan punca-punca berkaitan fenomena projek-

projek perumahan yang terbengkelai secara berstruktur and kesan-kesannya dari

perspektif sosial, ekonomi dan alam sekitar. Kajian awal yang menggunakan analisis

kandungan ke atas ulasan literatur telah mengenal pasti pemegang taruh utama.

Metodologi kajian kuantitatif telah dijalankan dalam pengumpulan data melalui

borang soal selidik yang distruktur berdasarkan ulasan literatur serta temu ramah

awalan dan perbincangan dengan 10 orang pemegang taruh dalam industri hartanah.

Seramai 52 orang responden yang mewakili pemaju, kontraktor, perunding, REHDA,

HBA, Abandoned Property Owners Association dan bank telah menyertai kajian ini.

Data telah di analisis menggunakan statistik deskriptif untuk mendapatkan purata

skor. Hasil kajian ini merumuskan bahawa punca utama projek-projek perumahan

terbengkalai di Malaysia ialah faktor kewangan dan diikuti oleh faktor

pentadbiran/strategi dan polisi. Hasil kajian ini juga mengesahkan bahawa kesan-

kesan yang utama ialah kesan sosial, ekonomi dan alam sekitar; dikategorikan

selanjutnya sebagai perspektif kewangan, pentadbiran dan polisi. Satu kerangka

analitik dalam bentuk kerangka ikan mengilustrasikan punca-punca dan kesan-kesan

terbengkalai dikategorikan mengikut perspektif yang berlainan serta penglibatan

pemegang taruh yang relevan. Hasil kajian ini dapat menyumbang pengetahuan dan

penyelesaian yang tidak ternilai kepada pemegang taruh utama agar mereka dapat

membuat pilihan pilihan dan keputusan yang wajar bagi mengelakkan diri daripada

terperangkap pada masa depan.

vii

TABLE OF CONTENTS

TITLE i

DECLARATION ii

DEDICATION iii

ACKNOWLEDGEMENT iv

ABSTRACT v

ABSTRAK vi

TABLE OF CONTENT vii

LIST OF TABLES xiii

LIST OF FIGURES xv

LIST OF APPENDICES xvi

CHAPTER 1 INTRODUCTION 1

1.1 General overview 1

1.2 Background of study 4

1.2.1 Recent developments 6

1.3 Problem statement 9

1.4 Scope and focus of research 13

1.5 Research questions 14

1.6 Research aims and objectives 14

1.7 Theoretical framework of research 15

1.8 Scope of study 17

1.9 Research methodology 17

1.9.1 Preliminary research 18

1.9.2 The quantitative research 18

viii

1.9.2.1 Research population & sample 18

1.9.2.2 Research instrument 19

1.9.3 Data analysis 19

1.10 Significance of study 19

1.11 Conclusion 21

CHAPTER 2 LITERATURE REVIEW 23

2.1 Introduction 23

2.1.1

Government’s action and inaction 26

2.1.2

Introduction of special bodies and

incentivisation to revive abandoned projects 28

2.2

A review of the specific causes of abandoned

projects in Malaysia

29

2.2.1 Causes related to financial perspectives 29

2.2.2 Causes related to policy perspective 34

2.2.3

Causes related to administrative/strategy

perspective 40

2.2.4 Causes related to other perspectives 46

2.3

A review of the effects of abandoned projects in

Malaysia

48

2.3.1 Social effects 49

2.3.2 Economic effects 53

2.3.3 Environmental effects 56

2.4 Literature research findings 58

2.5 Conclusion 60

CHAPTER 3 RESEARCH METHODOLOGY

61

3.1 Introduction 61

ix

3.1.1 Recent developments in Penang 63

3.2 Research design 65

3.3 Research methodology 68

3.3.1 Quantitative method 69

3.4 Research participants and sampling 70

3.5 Research instruments 73

3.5.1 Survey questionnaire 73

3.6 Data analysis procedures 75

3.6.1 Descriptive data analysis 76

3.7 Summary 77

CHAPTER 4 RESEARCH FINDINGS & DATA ANALYSIS 78

4.1 Chapter overview 78

4.2 Weightages and responses 80

4.3 Calculation of mean score 81

4.4 Results of quantitative analysis 82

4.5

Objective 1: Root causes of abandoned residential

projects

82

4.5.1 Root causes - Developers 82

4.5.2 Root causes - Contractors 83

4.5.3 Root causes - Consultants 84

4.5.4

Root causes – Real Estate and Housing

Developers Association

86

4.5.5 Root causes – House Buyers Association 87

4.5.6

Root causes – Abandoned Property

Owners Association 89

4.5.7 Root causes – Banks 91

x

4.6

Objective 2: Effects of abandoned residential

projects 92

4.6.1 Effects - Developers 94

4.6.2 Effects - Contractors 94

4.6.3 Effects - Consultants 95

4.6.4

Effects – Real Estate and Housing

Developers Association

96

4.6.5 Effects – House Buyers Association 97

4.6.6

Effects – Abandoned Property Owners

Association 98

4.6.7 Effects – Banks 99

4.7 Overall findings 99

4.7.1

Main root causes of abandoned of

residential projects 100

4.7.2

Main effects of abandoned residential

projects 101

4.7.3

Relationship between the causes of

abandoned projects to the various

stakeholders

102

4.7.4

Formulation of a conceptual framework

showing relationship between main root

causes and main effects 103

4.8

Other root causes and effects stated by respondents

in questionnaire 104

4.8.1 Other root causes 104

4.8.2 Other effects 106

4.9

Suggestions and recommendations by respondents 106

4.9.1

Suggestions and recommendations by

consultants

107

4.9.2

Suggestions and recommendations by 107

xi

REHDA

4.9.3

Suggestions and recommendations by

House Buyers Association 107

4.9.4

Suggestions and recommendations by

Abandoned Property Owners Association

(Victims Malaysia) 108

4.9.5

Suggestions and recommendations by

banks 108

4.10

Summary 108

CHAPTER 5 CONCLUSION AND RECOMMENDATIONS 110

5.1 Introduction 110

5.2

Summary of main root causes of abandoned

residential projects

112

5.2.1 Main root causes - Financial perspective 112

5.2.2 Main root causes - Policy perspective 113

5.2.3

Main root causes – Administrative/Strategy

perspective 113

5.2.4 Main root causes – Other perspectives

114

5.3

Summary of main effects of abandoned

residential projects

114

5.3.1 Major effects – Social

115

5.3.2 Major effects – Economic

115

5.3.3 Major effects – Environment

116

5.4 Relationship between causes to the stakeholders

117

5.5 Formulation of a conceptual framework

117

5.6

Limitations of the current research

117

5.7 Recommendations for future research

119

xii

5.7.1

Contributing factors relating to developers,

contractors, banks and local authorities 119

5.7.2

Increase in legal action against purchasers,

developers and contractors 120

5.7.3 Larger sample population 120

5.7.4 Involve other stakeholders left out 120

5.7.5 Qualitative research 121

5.7.6

Study existing laws, regulations and

policies 121

5.7.7

Well-developed compensation,

expropriation and ruin declaration

procedures 121

5.7.8

Research specific to every single

stakeholder 122

5.7.9 The Build-Then-Sell (BTS) system 122

5.8

Conclusion 123

REFERENCES

126

APPENDIX

142

xiii

LIST OF TABLES

1.1 Abandoned housing projects In Peninsular Malaysia (January

2009 to March 2013)

8

1.2 Government expenditure to revive abandoned projects 9

1.3 Abandoned housing projects by state until 30 June 2015 10

1.4 Overall statistics of problematic private housing projects -

delayed and sick as at 28 February 2014

11

2.1 Total number of abandoned housing projects (Peninsular

Malaysia)

24

3.1 Overall statistics of problematic private housing projects 64

3.2 Targeted samples of population for survey 72

4.1 Number of respondents and questionnaires received 78

4.2 Weightage for responses 80

4.3 Calculation of mean score 81

4.4 Range of mean scores 82

4.5 Root causes of abandoned residential projects by developers 83

4.6 Root causes of abandoned residential projects by contractors 83

4.7 Root causes of abandoned residential projects by Consultants 85

4.8 Root causes of abandoned residential projects by REHDA 86

4.9 Root causes of abandoned residential projects by HBA 87

4.10 Root causes of abandoned residential projects by Abandoned

Property Owners Association Malaysia

89

4.11 Root causes of abandoned residential projects by Banks 91

4.12 Effects of abandoned residential projects by Developers 94

4.13 Effects of abandoned residential projects by Contractors 94

4.14 Effects of abandoned residential projects by Consultants 95

4.15 Effects of abandoned residential projects by REHDA 96

4.16 Effects of abandoned residential projects by HBA 97

4.17 Effects of abandoned residential projects by Abandoned

xiv

Property Owners Association (Victims Malaysia) 98

4.18 Effects of abandoned residential projects by banks 99

4.19 Summary of main root causes of abandoned residential

projects

100

4.20 Summary of main effects of abandoned residential projects 101

4.21 Relationship between main root causes and main effects 103

4.22 Other root causes of abandoned residential projects not stated in

questionnaire

104

4.23 Other effects of abandoned residential projects not stated in

questionnaire

106

4.24 Suggestions and recommendations by Consultants to avoid

further and continuous abandonment of residential projects

107

4.25 Suggestions and recommendations by REHDA to Avoid

Further and continuous abandonment of residential projects

107

4.26 Suggestions and recommendations by HBA to avoid further

and continuous abandonment of residential projects

107

4.27 Suggestions and recommendations by Victims Malaysia to avoid

further and continuous abandonment of residential projects

108

4.28 Suggestions and recommendations by Banks to avoid further

and continuous abandonment of residential projects

108

xv

LIST OF FIGURES

1.1 Scope and focus of research 13

1.2 Theoretical framework of research 16

2.1 Cause and effect diagram of abandoned residential projects 59

3.1 The framework of research design 65

3.2 Communication process of primary data collection 67

4.1 Number of questionnaires distributed and returned 79

4.2 Root causes of abandoned residential projects according

to Developers

82

4.3 Root causes of abandoned residential projects according

to Contractors

83

4.4 Root causes of abandoned residential projects according

to Consultants

84

4.5 Root causes of abandoned residential projects according

to REHDA

86

4.6 Root Causes of abandoned residential projects according

to HBA

87

4.7 Root causes of abandoned residential projects according

to Abandoned Property Owners Association Malaysia

89

4.8 Root causes of abandoned residential projects according

to Banks

91

4.9 Effects of abandoned residential projects according to all

respondents

93

4.10 (Ishikawa) Fishbone diagram (Analytical Framework) – Cause &

Effect analysis of abandoned residential projects

102

xvi

APPENDIX

LIST OF APPENDICES

TITLE

PAGE

A Questionnaire 142

B Mean scores tabulated in questionnaire (Master sheet) 157

C (Ishikawa) Fishbone diagram (Analytical Framework) -

Cause & effect analysis of abandoned residential projects

167

D Seminars / Papers presented 168

E Vita 169

CHAPTER 1

INTRODUCTION

1.1 General overview

The construction industry is a developing industry and it is an important component

in Malaysia’s economic growth (Chia, et al., 2011). Generally, the development rate

of a country is critically related to the infrastructure development. The housing

industry is an important sector that plays a major role in the development of a

country and its economy.

According to Nuarrual Hilal (2008a) the demand for residential property over

the past three decades has resulted in numerous problems being encumbered by

developers, contractors and buyers in the building industry in Malaysia. One such

problem is that it is contributing to an alarming surge in the number of abandoned

residential projects in the country. Although the housing industry is one of the main

priorities of the government, persistent major problems are being encountered,

resulting in the sui generis (unique) abandoned housing projects. There have been

initiatives to remedy this problem by the government, very much driven by growing

concerns by key stakeholders regarding the increasing number of abandoned

projects. Although efforts of the research community has drawn attention to various

aspects of the problem, however little has been done to identify the causes and

effects of abandonment of housing projects with respect to the key stakeholders.

Hence, this study has been undertaken to identify the causes of abandoned residential

projects as well as gauge the effects of such projects on the building industry and

2

developers, the key stakeholders in general, especially the innocent buyers, the

funding financial institutions and other related parties of the housing industry.

It was also mentioned (Nuarrual Hilal, 2008a) that the housing industry has

brought about numerous benefits and contributed towards the economic and social

development and growth of the nation, but along with it came a nightmare and a

barrage of problems related to abandoned housing projects. In Malaysia, the demand

for housing is relatively high compared to existing supply. This has contributed to a

strong interest amongst property developers to over-capitalize on the continuing

demand leading to some negative impacts on the property industry, such as that of

abandoned projects. It gives a person great excitement and satisfaction when they

book their first home in the hope of finally owning a property which they can call

their own but when the project is stalled for various reasons, they are left stranded,

financing an incomplete house which is indefinitely abandoned.

Nuarrual Hilal (2008a) stated that the buyers feel cheated and are furious

when their dream houses are not completed or abandoned for long periods of time.

The question commonly asked is as to whether buyers have sufficient knowledge or

whether they have any knowledge at all of their rights as buyers. Buyers accuse the

banks of being inhumane, as to why the loan should be paid when the house is

incomplete and undelivered as promised. The issue of abandonment is never

stipulated in the loan agreement between the buyer and the bank. Thus, there is no

linkage between a loan agreement and the sale and purchase agreement. The loan

agreement is merely a kind of loan product offered by a bank. The completion of a

housing project within the stipulated period, with quality as per specifications laid

down in the Sale and Purchase Agreement and in compliance to and the satisfaction

of interested parties, requires cooperation amongst the relevant key players, such as

the contractors, developers, financial institutions, suppliers and buyers, amidst tight

project management

Consumers Association of Penang (2007) classifies Housing Projects as

abandoned projects when:-

i. Construction work in the project site has stalled continuously for 6

months or more, whether during the project completion period or past

the scheduled date of completion, in accordance to the Sales and

Purchase Agreement.

3

ii. A developer is unable to complete the project, or when the Housing

Controller considers that the developer can no longer carry out their

responsibilities as a developer.

It is without doubt that projects that end up being classified as abandoned do

have the recognizable associated symptoms that render them being categorized as

‘delayed project’, and worse still as a ‘sick project’. These categories are defined

accordingly by Abdul Aziz and Abdelnaser (2011) as below:

i. Delayed Project: Project facing delay between 10% - 30% compared to actual

expected development;

ii. Sick Project: Project facing delay more than 30% compared to actual

expected development or the expiry period of the Sale and Purchase

Agreement.

The Consumers Association of Penang (2007) in its article “Abandoned

Housing Projects – Who Suffers & What Can Be Done”, are convinced that the

buyers are the worst affected when housing projects are abandoned, whereby they

have to start and continue making payments on their housing loans even if their

houses are not completed and unfit to live in. Failing which, legal action would be

taken against the house buyers, followed by bankruptcy proceedings and eventually

being adjudicated bankrupt. According to the Consumers Association of Penang

(2007) between 1990 to 2005, 261 projects involving 88,410 houses in Peninsular

Malaysia were abandoned. A total of 58,685 buyers were affected by this problem.

This problem of abandoned housing projects is indeed serious and the root causes,

irrespective of whether it is that of the house buyers’, the developers’ or the Housing

Ministry, has to be identified immediately.

The implementation of the Housing Development (Control and Licensing

Amendment) Act, 2007 made bold changes to revamp the local property sector and

contributed to improving the efficiency of the country’s new housing development

delivery system. The fast track approval system was implemented for greater

efficiency and transparency in the Housing Industry. The One-Stop Centre was set

up for a speedier process in handling and approving housing projects, replacing the

Certificate of Fitness for Occupation (CFO) with the Certificate of Completion and

Compliance (CCC) and incentives for developers to adopt the Build Then Sell (BTS)

concept, in contrast to the existing Sell Then Build (STB) method. The changes

4

were expected to bring about more transparency, full disclosure and practical

flexibility with no overlapping of processes, better building delivery system, fast

track approval and cutting down red tape, thereby making the country investment

friendly and ensuring that the housing industry would be more competitive (Housing

Development Control and Licensing (Amendment) Act, Act A1289, 2007).

However, the issue of abandoned housing projects is still a persistent problem.

Despite attempts being made to identify some of the causes of abandonment

of housing and commercial projects (Mohamed Sukeri, 2005; Ibrahim, 2006;

Norharnila, 2006), the problem of abandonment seems to have persisted since the

1970s mainly due to the lack of political will in implementing significant and radical

changes in the housing sector as noted by Nuarrual Hilal (2009). The unresolved

state of affairs regarding abandonment has prompted certain quarters to propose for

the implementation of the ‘build then sell’ concept in Malaysia in order to resolve the

problem of abandoned housing projects (National House Buyers Association, 1991).

This system has long been implemented in other countries such as Singapore and

New South Wales, Australia and the responsibility is entrusted upon the Housing

Development Board under the perview of the Minsitry of National Development in

Singapore (Nuarrual Hilal, 2009).

It is undeniable that the seriousness of the problem regarding abandoned

housing projects warrants for a detailed research and study on the causes that lead to

residential projects being abandoned and the effects of the said abandonment on all

key stakeholders.

1.2 Background of the study

Since the independence of Malaysia in 1957 there has been a gradual increase in

demand for residential property, in tandem with the population and economic growth

of the country (Nuarrual Hilal, 2011). This problem of abandoned housing projects

is indeed serious, and has to be resolved immediately irrespective of whom the finger

should be pointed at. The Federal Government’s top priority has always been to

provide sufficient and suitable housing accommodation to all residents. This

enormous task of constructing and building housing accommodation has been given

5

to the developers who are subjected to rules and regulations laid down by the

government. Private Developers licensed under the Housing Development (Control

and Licensing) Act, 1966 and the respective Regulations have been given the task of

constructing and completing the residential and industrial buildings to fulfil the

demands of buyers who comprise of the various categories of society.

Abandoned housing has become a severe and perpetual headache to the

government, financial institutions and purchasers. The cause has often been assumed

to be due to legal problems and the recession, often attributed to the East Asian

Financial Crisis which drastically affected the Malaysian economy in 1997, which

was compounded by the ongoing Global Financial Crisis. The Consumers

Association of Penang (2007) in its article ‘Abandoned housing projects-Who suffers

& What Can be Done?’ identified the following common causes of abandoned

housing projects:

i. Delays in the approval of projects by the government agency, responsible for

the escalation of house prices.

ii. Developers encounter financial problems in the course of development.

iii. Delay in the issuance of Certificate of Fitness for Occupation although the

houses have been completed.

iv. Developers take a deposit and keep it or use it for another project being

developed elsewhere, at the same time.

v. Construction work not in accordance to specifications.

vi. Construction work is incomplete.

vii. Buyers pay in cash or through end financing but fail to get their titles from

the bank that is funding the project because the developer fails to settle his

loan (bridging or term).

viii. Interest rates imposed by banks are too high.

ix. Developers complete the project but eventually abandon it due to their failure

in meeting all the specifications.

The timely completion and delivery of the houses to the purchasers is

significant but it becomes an issue when the houses are delayed beyond the

completion period mentioned in the sale and purchase agreement (Ng, 2007). House

buyers are further blacklisted by the banks when they fail to service their bank loans

6

(Yip, 2009a; Yip, 2009b). Having been blacklisted, they are unable to buy another

property unless they pay back their loans (Yip, 2009b).

For over two decades, the property industry has been grappling with the surge

of abandoned housing projects which has caused hardship to many buyers and has

remained a major thorn in the flesh until today. According to the Ministry of

Housing and Local Government (2009), there was a total of 34 Abandoned Housing

Projects nationwide in Malaysia, between 1990 and 2009 at various levels of

completion, involving 9,155 units and 5,484 buyers, requiring Developers or White

Knights to salvage, revive or rehabilitate the said projects. This problem of

abandoned housing projects is indeed serious. Thus, the root cause, irrespective of

who is to be blamed has to be resolved immediately.

Accordiing to Nuarrual Hilal and Sharifah Zubaidah (2012), when a housing

developer company is wound up, a private liquidator or provisional liquidator or the

official receiver under the Department of Insolvency takes over the affairs and

business of the company. The liquidator may only rehabilitate the abandoned

projects if the projects are viable for rehabilitation with the approval of the creditors,

contributories, the committee of inspection and the court and where there are

adequate funds to finance the rehabilitation. On the other hand, if it is not viable, due

to insufficient funds or the complexity the projects, they may be stalled forever

without any prospects for rehabilitation, to the detriment of the purchasers.

1.2.1 Recent developments

According to a professor of law at Universiti Utara Malaysia, Nuarrual Hilal

(2008b), the Malaysian Housing and Local Government Ministry records show that

abandoned housing projects had been reported since the 1970s and due to the Global

Financial Crisis, their numbers have increased. In June 2005 the numbers were 277,

with 50,183 buyers, 75,356 dwellings and the projects were worth RM7.033 billion.

However, these numbers do not give a true picture as some of the projects are not

listed and thus the actual figure is much higher (Nuarrual Hilal, 2008b).

Consumers Association of Penang (2007) reported the following. In 1983,

abandoned housing projects were identified by the government for the purpose of

rehabilitation. In 1990, an Abandoned Housing Project Revival Fund (TPPPT) was

7

established by Bank Negara and the Abandoned Housing Project Revival Pvt. Ltd.

was given the responsibility to conduct feasibility studies in view of reviving those

projects. The government then set up a special purpose vehicle, similar to the

Pengurusan Danaharta Nasional Bhd (Danaharta), to be placed under the

responsibility of the National Housing Corporation (Perbadanan Perumahan

Negara). Hence, Syarikat Perumahan Negara Berhad, a wholly owned subsidiary of

the Ministry of Finance, was appointed to take over and revive abandoned housing

projects; and the Housing and Local Government Ministry set up a special fund to

revive abandoned projects.

The Housing and Local Government Ministry (2009) in an article published

in the New Straits Times (2009) entitled “Rescue plans for abandoned projects”,

gave its assurance that housing projects launched will not be abandoned following

the enforcement of new laws and the introduction of a special purpose vehicle. The

Housing and Local Government Minister said that the challenge was to instill

confidence in developers and buyers to ensure the industry continues to be active

despite the unsupportive economic situation.

Pemudah (Pasukan Petugas Khas Pemudahcara Perniagaan), a special task

force comprising 23 highly respected individuals from both the private and public

sectors, set up by the government on 7th

February 2007 to facilitate business and

reporting directly to the Prime Minister (Pemudah, 2007), suggested ways to reduce

the number of abandoned housing projects in Malaysia. There were 423 housing

projects that were either delayed, ailing or abandoned, being monitored by the

Ministry of Housing and Local Government (MHLG) as at 30 June 2010. MHLG

implemented stiffer actions by compounding and prosecuting errant developers and

blacklisting some. Pemudah in their annual report in 2010 proposed that the deposit

required to get a developer's licence from the current RM200,000 be raised by 5 per

cent. They also suggested that it be made mandatory for developers to take on the

build-then-sell concept (BTS) and introduce the housing insurance scheme as

suggested by the Real Estate and Housing Developers' Association of Malaysia

(Rehda), to provide a boost to buyers. Developers on the other had complained that

they would have to build the properties with no assurance that buyers would stay.

Projects are often abandoned due to mismanagement, financing issues, mismatched

development components and fraud by developers (Sharen, 2011).

8

Sanjugtha (2013) in her article “White Knights Galloping In”, disclosed that

the government has spent RM156 million over the past four years to revive 126

abandoned housing projects, completing 29,799 homes, an average of RM5,238

spent to revive a house in an abandoned project. A total of 178 housing projects

have been abandoned since 2009, involving more than 50,000 low to medium cost

income households. Sanjugtha (2013) further elaborated that to overcome this

problem, the Ministry of Housing and Local Government (MHLG) set up the

Abandoned Project Rehabilitation Division (APRD) under the purview of the

National Housing Division. This division has revived 126 projects with another 66

in the pipeline (see Table 1.1). APRD has been negotiating revival packages

between white nights and financial institutions to minimise the government’s need to

top up and ensure smooth revival of abandoned projects (see Table 1.2).

Table 1.1: Abandoned housing projects in peninsular Malaysia

(January 2009 to 2015)

Year

NO OF PROJECTS DEVELOPMENT STATUS

Current New Total Planned Under

Construction Completed

2009 144 4 148 87 58.80% 46 31.10% 15 10.10%

2010 133 13 146 50 34.20% 60 41.10% 36 24.70%

2011 110 6 116 22 19.00% 62 53.40% 32 27.60%

2012 84 11 95 9 9.47% 51 53.68% 35 36.84%

2013 60 27 87 24 27.50% 33 37.90% 30 34.50%

2014 57 10 67 32 47.70% 20 29.90% 15 22.40%

2015 52 1 53 30 56.60% 22 41.51% 1 1.89%

144 72 216 30 13.89% 22 10.19% 164 75.92%

Source: Abandoned Project Rehabilitation Division, National Housing Department

(2015)

9

Table 1.2: Government expenditure to revive abandoned projects

Government Expenditure to Revive Abandoned Projects

Year RM (Million) No. of Projects

2011 14.5 5

2012 51.4 7

2013 62.1 (Committed) 10

37.9 (Budgeted) 4

2014 28.1 (Budgeted) 1

Total 194 27

Source: Abandoned Project Rehabilitation Division, National Housing Department

(2014)

1.3 Problem statement

The seriousness of the problem of abandoned residential projects has forced the

government to step in and splash huge sums of money to rehabilitation these

projects, more so in the interests of the house buyers. The Housing Developers

(Control and Licensing) Act of 1996 too has been amended in the hope of resolving

this problem. Unfortunately, abandoned residential projects still exist and the

problem has not been solved. Thus, there is a need to study the factors that continue

to contribute towards residential projects being abandoned and their effects from a

socio-economic perspective in avoiding this problem form recurring continuously.

The National House Buyers Assosiation (2008) has noted that abandoned

housing projects are an eyesore and proof of business failures especially when

abandoned buildings become breeding grounds for mosquitoes and other unwanted

activities like shelters for drug addicts. Abandoned buildings remain uncompleted

whilst the unlucky buyers cry out of frustration. Thick undergrowth and weeds creep

over concrete house pillars and dark moss discolour concrete pillars. The empty

building sites turn into ghost towns whilst the ugly and unstable abandoned buildings

pose danger and affects the environment.

Based on recent statistics, it appears that the issue of abandoned housing

projects is still a presistent problem in Malaysia (see Table 1.3). Moreover, the

prime indicators leading towards abandonment, which is delayed and sick projects,

are still aplenty (see Table 1.4). The tables further indicate that Penang is an average

10

of the worst and best case of delayed and sick projects, especially in terms of the

number of units and house buyers involved. Penang is a fair representative of the

issues ralated to abandoned housing projects in Peninsular Malaysia and thus the

researcher’s choice in conducting this research in Penang. Syafril Idzwan (2008), in

his research found that housing projects are continuously being delayed and

eventually some ending up in an abandoned state despite the existence of the relevant

laws, regulations and statutory provisions governing the housing industry. Syafril

Idzwan (2008) argued that there are some pertinent questions that need to be

answered, especially as to whether these laws, rules, regulations and statutory

provisions or any improvements to them, can help prevent and avoid this catastrophe

from recurring in the future or help protect the rights and interests of the parties

involved.

Table 1.3: Abandoned housing projects by state until 30 June 2015

STATE NUMBER OF

PROJECTS

NUMBER OF HOUSE

UNITS

NUMBER OF

BUYERS

Johor 8 2,734 2,051

Kedah 2 765 169

Kelantan 1 39 29

Melaka - - -

Negeri Sembilan 4 973 807

Pahang 4 761 589

Perak 9 962 600

Perlis - - -

Pulau Pinang 2 1,550 1,337

Selangor 22 7,288 4,798

Terengganu - - -

Kuala Lumpur 1 134 23

TOTAL 53 15,206 10,403

Source: National Housing Department (MHLG, 2015)

11

Table 1.4: Overall statistics of problematic private housing projects - delayed and

sick as at 28 February 2014

NO. STATES NO. OF DELAYED

PROJECTS

NO. OF SICK

PROJECTS

1. PERLIS 1 0

2. KEDAH 11 14

3. PULAU PINANG 2 12

4. PERAK 0 51

5. SELANGOR 18 72

6. WILAYAH PERSEKUTUAN 6 3

7. NEGERI SEMBILAN 1 10

8. MELAKA 0 2

9. JOHOR 19 28

10. PAHANG 1 10

11. TERENGGANU 0 10

12. KELANTAN 1 13

TOTAL 60 225

Source: Official Portal National Housing Department (2014)

According to Mohd Rafick Khan (2010), the Housing Development Act ( Act

118) which governs housing development in Malaysia, forces purchasers and

developers to sign the standard Sale and Purchase Agreement strictly without any

deviation, as provided in schedule G or H of the said Act, upon a purchase of any

property from a developer. However, it is common knowledge that the SPA is a

contract between a willing buyer and a willing seller in the purchase of residential

property. The agreement does not give much rights to the house buyers but plenty of

obligations, and a freehand to the developer who will dictate the property

development. There is no avenue for the buyers to take any action against the

developer when the project is delayed. Buyers may make a claim for late delivery

charges (LAD) against developers but they may only do so when the project is fully

completed. The Ministry of Housing and Local Government (2010) statistics showed

that 252,000 house buyers were affected as at February 2010 and that it was a

RM37.8 billion problem.

According to the National House Buyers Assosiation (2008), there is no

protection for buyers or a comprehensive method of preventing or dealing with

abandoned or stalled housing projects. Buyers are often left all alone to face this

dilema of abandoned housing projects. However, of late some serious attention has

12

been directed at this problem, but not enough, as the problem seems to persist with

serious consequences. The trend in abandoned housing projects on the other hand,

appears to be on the decline, maybe due the the Government’s intervention and

measures taken.

The Consumers Association of Penang (2012) revealed that unlicensed

housing developers had scandalously carried out 195 housing projects right under the

eyes of the relevant parties in the housing industry.

According to Sanjugtha (2013), to date 187 housing projects have been

registered under APRD as abandoned, an addition of 43 to the initial 144 projects

registered with the department since its inception in 2009. A total of 67.38% of the

abandoned housing projects have been completed with another 24.6% currently

under construction, whilst a further six projects have been planned for this year.

Sanjugtha (2013) further reported that in 2013, Abandoned Project Rehabilitation

Division’s (APRD) records showed 69 abandoned housing projects, comprising 60

brought forward from 2012 that were not completed. Whilst nine new projects have

been reported as of end-March 2013, with a total of eight projects that have been

completed and 46 that were still under construction.

There has been public opinion calling on the government to intervene and

take over the rehabilitation of abandoned projects and at the same time to impose

legal provisions in preventing abandoned housing in future (Harian Metro, 2003). In

a report in the Utusan Malaysia (2004) the Prime Minister Abdullah Ahmad Badawi

in acknowledging the seriousness of abandoned housing projects, advised private

developers to not merely think of profit but also to be more fully responsible when

completing the projects. Previous researches such as Kamariah (1993) and Nuarrual

Hilal (2001) contended that the existence of abandoned housing projects is a national

problem affecting mainly private purchasers and leading to other problems like

encouraging criminal activities at project sites. The President of the Federated

Association of Consumer Malaysia (FOMCA) argued that the existence of

abandoned housing projects could also be related to the housing system based on the

‘sell the build system’ being practiced in Malaysia (Mingguan Malaysia, 1999).

Notably, the Ministry of Housing and Local Government [MHLG] (2013) has

highlighted complaints regarding project abandonment pertaining to rejection of

planning approvals, delays in hand-overs, refusal to pay compensation for late

13

delivery and conflicts involving local authorities, developers, consultants and

contractors occurring at different stages of housing delivery.

Previous research has mainly focused on generalizing the causes and effects

of abandonment, not providing a clear identification of ownership of the issues. Thus

this research aims to evaluate the main root causes and effects of abandoned

residential projects from the financial, administrative and policy perspectives

relevant to the key stakeholders involved in the housing industry due to the wide

array of multiple causes and effects of abandonment.

1.4 Scope and focus of research

The focus of this research is to reveal the causes relating to the phenomenon

of abandoned residential projects in a structured manner and its effects from a social,

economic and environmental perspective. Once the causes and the problems which

lead to the abandonment are identified, solutions can then be readily identified so

that the risk of housing projects getting abandoned can be eradicated or at the least

minimized to an acceptable level. However, this research does not serve to identify

and discuss specific solutions to this phenomenon.

Figure 1.1: Scope and focus of research

Source: Adapted from Vinetta Bell (2009)

Administrative

Policy

Financial

KEY STAKEHOLDERS Internal & External

(Key Drivers) 1 Developers 2 Contractors 3 Consultants 4 House Buyers 5 Banks & Fin. Institutions 6 Real Estate & Housing

Developers Association 7 House Buyers Association 8 Abandoned Property

Owners Association (Victims Malaysia)

Causes Effects Abandoned

Housing Projects

14

To start with, this research focuses on the study of factors causing the

abandonment of residential projects by conducting literature review and preliminary

discussions and interviews with selected stakeholders such as consultants,

developers, contractors and purchasers involved in the study in order to structure a

comprehensive data collection questionnaire primarily aimed at identifying the root

causes and effects of abandonment. The respondents chosen were the key

stakeholders within the property sector, adequately knowlegable on the issue of

abandonment of residential projects. Hence, recommendations for overcoming the

issue of abandonment are forwarded based on stakeholder feedback. The diagram in

Figure 1.1 shows the scope and focus of this research.

1.5 Research questions

i. What are the causes of abandoned residential projects in the property industry

in Peninsular Malaysia according to specific categories of stakeholder

responsibility?

ii. What are the effects of abandoned residential projects in the property industry

in Peninsular Malaysia from a social, economic and environmental

perspective?

iii. What is the relationship between causes of abandoned projects with respect to

the various stakeholders in the property industry in Peninsular Malaysia?

iv. Can a conceptual framework be formulated for mitigating the problems

leading to abandonment of residential projects in Peninsular Malaysia be

developed as a guide?

1.6 Research aims and objectives

The aim of this research is to identify the main causes and effcts of abandoned

residential projects specific to the key stakeholders in the property industry in

Peninsular Malaysia from a financial, administrative/strategy and policy perspective.

Thus, this research will evaluate the main root causes and effects of abandoned

residential projects in formulating an analytical (fish-bone diagram) and conceptual

15

frameworks to ascertain if there lies a relationship between the causes and effects

with respect to the various key stakeholders.

Based on the aims of this research, the following research objectives are

formulated. The following objectives will function as the guidelines of this research:

i. To identify the main root causes of abandoned residential projects in the

property industry in Peninsular Malaysia attributed to the various key

stakeholders.

ii. To identify the main effects of abandoned residential projects in the property

industry in Peninsular Malaysia from a social, economic and environmental

perspective.

iii. To evaluate the relationship between causes of abandoned projects with

respect to the various stakeholders in the property industry in Peninsular

Malaysia.

iv. To formulate a conceptual framework for mitigating the problems leading to

abandonment of residential projects in Peninsular Malaysia.

1.7 Theoretical framework of research

Feedback in the form of preliminary interviews and questionnaires from the said

parties gave a comprehensive insight on the main causes and as to the surge in the

number of abandoned housing projects in Peninsular Malaysia.

In aiming to identify the main causes and effects of abandoned residential

projects, it was considered as of equal importance to establish the relationship

between the causes and effects based on a cause-and-effect fishbone diagram

methodology to establish the causal relationship achievable by designing the

questionnaire in a categorical sense. This is considered valid based on matching

causes and effects according to pre-specified categories; as a pioneering piece of

work having to deal with complex array of variables. Additionally, this research sets

out to identify the parties involved and to what extent these causes relate to them.

Earlier researchers such as (Sambasivam and Yau, 2006), National House Buyers

Association (2006b), Chan (2009) and Hussin and Omran (2011) have already

indicated that there are several effects on certain innocent parties brought about by

this perennial problem in Malaysia.

16

Theories are formulated to explain, predict, and understand phenomena and

in many cases, to challenge and extend existing knowledge within the limits of

critical bounding assumptions. The theoretical framework is the structure that can

hold or support a theory of a research study. The theoretical framework introduces

and describes the theory that explains why the research problem under study exists

(Swanson, 2013). The variables of the research are represented as a form of

theoretical framework. Following the determination of the variables, a research

strategy was drawn up (see Figure 1.2). The theoretical framework describes the

relationship amongst the variables in the research and the effects of that relationship

that can also be seen as an input-output process. The theoretical framework in Figure

1.2 shows the focus of this research.

The research flow shows the separation between the factors and parties

related to the Causes of Abandoned Projects and the Effects of those causes on the

respective parties. From the feedback during the preliminary interviews and

discussions with selected stakeholders in the property industry and literature review,

it was noted that amongst the parties who are knowledgeable and able to give initial

feedback on the causes of abandoned projects are the Real Estate and Housing

Developers Association, the House Buyers Association, Consultants in the Housing

Industry such as Architects, Engineers and Surveyors, Developers and Contractors,

House Buyers, Banks and Financial Institutions, the Abandoned Property Owners

Association and the Ministry of Housing and Local Government.

Figure 1.2: Theoretical framework of research (Adapted from Owston, 2007)

Sim

ple

Ind

ep

en

de

nt

Var

iab

les

(Fac

tors

)

Policy Perspective

Perspective

Financial Perspective

Administrative Perspective

Abandoned

Housing

Projects

Economic Recession / Financial Crisis Environmental Factors

Culture Clash / Selfish Behaviour

Project Characteristics

Management /

Participants Procurement

Risk & Uncertainty

Litigation, Bribery &

Fraudulent Practices

Co

mp

lex In

dep

en

de

nt V

ariable

s

(Factors)

17

1.8 Scope of study

The scope of this study was limited to Property Developers, Contractors, Consultants

in the housing industry, House Buyers, the Real Estate and Housing Developers

Association (REDHA), House Buyers Association (HBA), Abandoned Property

Owners Association of Malaysia (Victims Malaysia), Banks and Financial

Institutions, records with the Ministry of Housing and Local Government, Local

Authorities, Syarikat Perumahan Negara Berhad (SPNB), the Abandoned Project

Rehabilitation Division and other relevant parties involved in abandoned projects.

This study was carried out based on data retrieved from the relevant parties involved

in the housing industry primarily in Penang, which is quite representative of

Peninsular Malaysia in relation to the issue of housing project abandonment. Penang

is an average of the worst and best cases of the number of abandoned housing

projects in Peninsular Malaysia by virtue of the number of delayed and sick projects,

abandoned projects and the number of units and buyers involved (See Tables 1.3 and

1.4), (National Housing Department, 2014) and (National Housing Department,

2015). Additionally, to ensure key stakeholder (respondent) representation, some

national bodies based in Kuala Lumpur, like the Real Estate and Housing Developers

Association, House Buyers Association and the Abandoned Propety Owners

Association Malaysia were included.

Hence, this research focused on abandoned residential projects in the state of

Penang as a representative sample, and the study also focused on the causes and

effects of specifically abandoned residential projects in the property industry. The

relevant parties, viewed as key stakeholders to the issue of abandonment were

interviewed and questionaires that were answered by them were analysed with

respect to the relevant research objectives.

1.9 Research methodology

This research was undertaken primarily using a quantitative methodology. In order

to elicit a clear understanding of the issues related to the problem of abandoned

residential projects, a brief preliminary research was undertaken. However, the

preliminary research is not described in particular detail as it served to structure the

18

main quantitative research, especially in the design of the research questionnaire. A

summary description is provided below.

1.9.1 Preliminary research

In ascertaining the problems that exists with respect to abandoned housing projects,

preliminary discussions with professionals were undertaken, study of relevant

published articles, internet resources and other forms of relevant literature were

analyzed briefly. Site visits to the abandoned housing projects gave a better

understanding of the actual conditions of the abandoned construction sites in terms of

effects.

In conclusion, this preliminary research involved collection of information

through personal discussions with selected developers, contractors, consultants and

house buyers in order to identify and/or refine the issues relating to abandoned

residential projects that helped to formulate and test the conceptual framework.

1.9.2 The quantitative research

A quantitative research analysis was used involving data collection through survey

questionnaires. Questionnaires were distributed to the target population followed by

personal visits, telephone calls and electronic mail messages reminding the

respondents to complete and return the completed questionnaires. Additional space

was also provided in the questionnaire to enable the respondents to state other causes

and effects of abandoned residential projects not mentioned in the questionnaire.

The respondents were also encouraged to make suggestions in overcoming

abandonment of residential projects.

1.9.2.1 Research population & sample

The population of this study consisted of key stakeholders such as house buyers,

property developers, contractors, consultants, the Abandoned Property Owners

Association Malaysia, the Real Estate and Housing Developers Association, the

House Buyers Association and Banks. Stratified Purposive Sampling Design was

19

used as the stratified sample of the research population was based on sample of the

various key stakeholders. A suitable sampling frame was identified for each

startified sample, thus determining a suitable sample size based on selecting an

appropriate sampling technique and the sample.

1.9.2.2 Research instrument

The main research instrument of this study was the survey questionnaire, in order to

achieve the objectives stated above. In designing the questionnaire, the researcher

ensured that the respondents were able to decode the questions the way it was

intended and to participate in providing other possible causes and effects of

abandonment and propose suggestions in resolving them. This was achieved by

consulting representative/s from each category of stakeholders not involved in the

actual research, namely 2 directors, 2 contractors, a consultant, an office bearer of the

Real Estate & Housing Developers Association, Penang, an office bearer of the

House Buyers Association, a senior bank officer and a house buyer with an

experience of an abandoned housing project.

1.9.3 Data analysis

Data analysis was undertaken after all the required data was collected before making

any inferences. Numbers were crunched to obtain the mean score for each item in

the questionnaire by multiplying the frequency of responses in each Likert Scale (f)

with the respective weightage (w). The sum of this value (∑) was then divided by

the total number of respondents in each category (n). Quantitative data was treated

and analysed in detail as described accordingly in the methodology chapter.

1.10 Significance of study

Abandoned residential projects are projects that are left without care in abandoned

construction sites either temporarily or permanently stalled for a long period of time.

Besides the fact that it brings misery and financial heartache to the purchaser, the

structures are completely left idle and unprotected, constantly at the mercy of

20

weather conditions. The concrete and other construction materials used deteriorate

over time, sometimes resulting in the project being incapable of revival or

rehabilitation and being abandoned indefinitely. This is especially true in Malaysia

where a drive around major cities, housing or industrial construction areas as well as

the outskirts, would reveal the eyesore of abandoned projects stalled at various stages

of incompletion.

This study will benefit all the key stakeholders involved in the Property

Industry, such as the Real Estate and Housing Developers Association, the House

Buyers Association, the Consumer Associations, Abandoned Property Owners

Association, Consultants in the Housing Industry such as Architects, Engineers and

Surveyors, Receivers and Managers, Liquidators, White Knights, Developers and

Contractors, Banks and Financial Institutions, the Ministry of Housing and Local

Government and the Local Authorities, Homeowner’s Tribunal and especially the

innocent House Buyers. The parties involved in the drawing up of laws and

regulations, development, construction and completion of the housing projects will

be made aware of how and where they had gone wrong in the past in contributing to

the increase in the number of abandoned residential projects. The banks and

financial institutions will be made aware that they have to play a more significant

and important role in scrutinising and monitoring the progress of the projects. This is

to ensure that in future, there is an early detection of delays in the construction and

completion of housing projects and thereby possibily rescuing projects from being

eventually abandoned.

The house buyers too, will be made aware of their legal rights and

responsibilities and they too, will realise that they have to be more aware of the laws

and procedures as well as monitor the progress of construction work carried out. The

house buyers who are usually the sole victims of any failed or stalled residential

projects will be made more fully aware of the consequences of a failed project on

them and how they can play a greater role from the signing of the Sale and Purchase

Agreement (SPA) to the issuance of the Certificate of Completion and Compliance,

to ensure that their unit in the said residential project does not end up being

abandoned or incomplete.

This study will inadvertently educate the relevant parties in the property

industry on the awareness regarding the issues relating to the abandonment of

21

residential projects in terms of clear economic, social and environmental causes and

implications. Thereby helping to correct, reduce or completely eradicate unnecessary

errors and risks of abandonment in the future attributed to the specific key

stakeholders of the problem. The relevant parties in the residential industry will be

aware that the completion of a housing project with Certificate of Completion and

Compliance is not merely as simple as entering into an SPA and collecting a 10%

deposit of the purchase price and obtaining loan facilities vide, loan agreements for

bridging/term/end-financing facilities. Developers have to realise that they have to

be financially sound before entering into these contracts and are capable of seeing

through the completion of the projects in compliance to the existing laws and specific

rules and regulation

1.11 Conclusion

This research was carried out to study the causes and effects of abandoned residential

projects in the property industry which is still considered to be a problematic issue

discussed daily and argued upon in the media and parliament; by authorities and

politicians directly responsible and affected by their abandonment. Statistics from

the Minsitry of Housing and Local Government show that there is a steady ever

increasing trend in the number of abandoned housing projects which has also

resulted in an increase in the number of personal and corporate insolvencies amongst

the purchasers, developers and contractors. It is apparent that due to this stigma

within the property industry in Malaysia, which is one of the main income

contributors of our nation’s economy has over the past two decades, a negative

image of the socio-economic sector both within Malaysia and to the outside world

has been projected. The social responsibilities of developers and contractors in the

modern day are more demanding than in the 1970´s. There are demands for well-

developed compensation, expropriation and ruin declaration procedures. New

mechanisms are being introduced to try and avoid the repetition of past mistakes and

efforts to better facilitate the management of abandoned projects through competent

public administration in more advanced economies. The amendments to laws are

attempting to protect the rights of citizens and to increase the responsibility of the

urbanizing agents (developers, contractors, etc.).

22

This study serves as an eye opener and will contribute in unearthing the

actual root causes, negligence and lack of commitment by key stakeholders that has

resulted in continuous abandonment of residential projects.

23

CHAPTER 2

LITERATURE REVIEW

2.1 Introduction

There are numerous problems faced by developers, contractors and buyers in the

property industry resulting in an alarming surge in the number of abandoned projects

in the country (Zairul and Rahinah, 2008). This research is vital, as the property

industry is one of the main priorities of the government in Malaysia and plays a

major role in the development of the country and its economy. This research has

attempted to identify the causes and effects of abandoned projects as well as scope

the areas for action of key stakeholders in the property industry, especially the

innocent buyers, developers and the funding financial institutions.

Developers constantly advertise their proposed projects in beautiful brochures

and make special offers, tempting buyers to rush into purchasing these houses

although the project will be completed much later. A house buyer would still have to

pay his housing loan and interest to the bank in accordance to the progress payments

released to the developer, even if the housing project is eventually abandoned.

Hence, a member of the lower income group will have the devastating consequence

of never being able to survive financially, thus ending his dream of owning his very

own house (Nuarrual Hilal, 2008b; National House Buyers Association, 2008).

In terms of avoiding the unpleasant situation of property development being

abandoned, it is implied in previous research that key stakeholders need to secure a

cooperative mode rather than resorting to legal action while having to face the

consequence of project abandonment by a contractor and the related negative effects.

24

For instance, Ismail (2008) noted that the completion of a housing project within the

stipulated period, with quality as per the specifications laid down in the Sale and

Purchase Agreement and in compliance to and the satisfaction of interested parties,

requires cooperation amongst the relevant key players such as the contractors,

developers, banks, suppliers and buyers, amidst tight project management.

Based on the statistics in Table 2.1, it is clear that the number of house buyers

affected by the problem of abandoned housing projects does not show any marked

decreasing trend. The Ministry of Housing and Local Government (2009) confirmed

that as at 2005, 261 projects involving 88,410 houses and 58,685 buyers in

Peninsular Malaysia were abandoned. An obvious knee-jerk reaction is to conclude

that legal action needs to be taken against the developers by the relevant parties,

which could lead to the developer ending up in liquidation. Obviously, this is not an

ideal or viable solution.

Table 2.1: Total number of abandoned housing projects (Peninsular Malaysia)

Year Ending

No. of

Abandoned

Projects

No. of

Affected

Houses

No. of

Affected

Buyers

Estimated Value (RM

million)

2000 514 107,702 68,340 7,524.51

2001 544 125,649 80,070 9,496.68

2004 227 75,356 50,813 7,033.08

2005 261 88,410 58,683 8,043.00

Source: Ministry of Housing and Local Government (Monitoring and Enforcement

Division) (2009)

Nuarrual Hilal (2008b) in his research suggested that insurance coverage for

housing projects such as that implemented in New South Wales, Australia, can also

be implemented in Malaysia. This is to ensure that in the event the developer

defaults in his obligation, the buyers still have an avenue to see their homes

completed. A comprehensive review is needed on the National Land Code (1965),

planning laws, building and housing laws, Town and Country Planning 1976, Street,

Drainage and Building Act 1974, Building By-laws 1984 and Housing Development

(Control and Licensing) Act, 1966. There should also be a review of the provisions

for special laws to regulate the rehabilitation of abandoned projects. Although

several provisions were introduced in some of the legislations in 2007, it remains

126

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