A Berita Harian report (May 1, 2022) said the main cause of the rise in “sick” housing projects was due to financial constraints faced by developers during the pandemic. The report also cited poor management, such as rising building material prices, lack of workers and unsuitable locations.
Unsuitable location seems to be a poor excuse. However, whether there is a pandemic or not, a project’s location does not change which leave us with rising material prices, workers issue and poor management.
When a developer embarks on a project, he would have done his costing with regards building materials and the timeline needed to complete it; as well as their feasibility and viability studies.
Back in 2020, a property consultant, who claimed anonymity said: “if there is really a need to buy a house, buy a completed unit which one can see and touch. Do not buy off-plan.”
His rationale was in a pandemic, developers would want to make as much sales as possible because they are after all, capitalists. In all likelihood, they will be some who may over-promise and under-deliver in situations that are beyond their control.
He added that the last two years saw many developers embarking on digital marketing. A buyer may not get what he sees from these virtual sales gallery visits or from the attractive marketing brochures because disruptions could possibly affect work quality.
Hence, the number of “sick projects” is reflective of the situation, although most of these projects started construction before the pandemic struck.
The same consultant said buying off-plan versus completed units is “an important issue” because a property is a big-ticket item and buying a house involves long-term commitment after signing multi-tier contracts.
“You can see the plus points and the negatives in a completed project. You know more or less what you are going to get. If the other units are already occupied, you know who your neighbours will be, whether they are tenants or owners. You can select the unit if there are many units available. Many people buy units off-plan because of the many incentives offered by developers but this is just marketing pitch and sales gimmicks. “Do not fall into the ‘getting the best choice, the best floor, the best view trap’ because what is important is, will the project be abandoned, what is the quality of the workmanship.
“Besides being able to see the unit instead of having to imagine it, the effective price after the various incentives may be lower than the earlier launch price. The buyer will also have stronger negotiation power over the developer,” he said.
And the risk of buying into a “sick” project is removed.
23% of launched projects end up being “sick” in Peninsular Malaysia?
According to the official statistics by the Housing and Local Government Ministry (KPKT), there were 2,552 housing projects launched with 443,541 units of housing involving 192,779 house buyers.
580 projects of which have fallen “sick” with 51,000 victims. That means that nearly 23% of Malaysian house buyers got affected due to errant housing developers. For every 100 housing projects launched; 23 projects will be diagnosed as fallen “sick”.
Observation
However, are the Government statistics a true and accurate reflection of the crisis?
Granted that COVID-19 was a global crisis and it has wrought much challenges in all sectors of the economy. Yes, it is also a fact that most of these projects were launched few years before the pandemic.
The problem was serious enough that the Government passed the COVID-19 (Temporary Measures for Reducing the Impact of Coronavirus Disease) Act, 2019 (ACT 829) law with a provision of a “legal shield” to people and businesses who are unable to fulfill their contractual obligations.
The laws offer legislative protection from legal consequences arising from inabilities to perform contractual obligations and allow affect parties time to remedy such shortcomings and hence, the “time freeze”.
Hence, the statistics too could be made to be read more accurately, if it was tweaked to reflect the inactive “time frozen” period.
Perhaps, this aspect was overlooked and should be reconciled by KPKT in the pillory of the rogue developers in their statistics. – June 12, 2022
Datuk Chang Kim Loong is the honorary secretary general of the National House Buyers Association (HBA).
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
