Sick projects a pain for developers, buyers

Sick projects a pain for developers, buyers

Michael (not his real name) bought a high-rise residential unit in 2017. After the sales and purchase agreement (SPA) was signed, he noticed some "unhealthy signs" in the construction of the housing project where he had booked a unit.

Construction stopped for almost a year but was reactivated after buyers complained to the Housing and Local Government Ministry and sought help from the National House Buyers Association.

Progress of the project was on-off-on-off until 55 per cent of the development was completed, Michael said.

"It was a traumatising experience. Most of the buyers had sleepless nights and we were clueless about what to do," he said.

However, they are still in limbo as the construction has stopped altogether.

A "sick project" has been delayed by more than 30 per cent compared to its scheduled progress or one whose SPA has lapsed, according to the Housing and Local Government Ministry's portal.

Siti Hawa (not her real name), another victim of a "sick project", and her husband bought a unit priced at RM300,000 in an affordable housing project in 2018. According to the SPA, they were supposed to get the keys to their house last month (May 2022). She said there were issues from the start but being new buyers, they were unaware of their rights.

"The SPA said the project will take 48 months (to complete), instead of 36 months. We did not question this because we did not know the units should be completed in 36 months.

"This means the developer was given a one-year extension from the start, which was already wrong," Siti Hawa said.

Under the Housing Development Act 1966 (Act 118), the delivery of vacant possession – when keys to the housing unit are handed to the buyer – is 24 months for landed properties and 36 months for stratified developments.

"We tried to call the ministry officials but were passed from one person to another. We did not know what to do and some of us had taken the bank moratorium and are now saddled with higher monthly payments as the banks have started to charge the full monthly installments because as far as they (banks) are concerned, the project is completed according to the SPA," Siti Hawa said.

The project is 100 percent sold.

Nearly 65 percent increase

According to the National Housing Department's Statistics on Private Housing Projects by Category, as of April 30, 2022, there were 539 sick projects versus 328 as of April 30, 2019, denoting a 64.33 percent hike in such schemes.

The number of buyers falling victim to sick projects rose to 46,463 in April this year against 23,400 in April 2019, a near 100 percent increase.

The number of launches fell to 2,630 in April 2022 against 2,795 three years ago.

Selangor has the highest number of sick projects at 119, followed by Johor (75) and Perak (73), according to the 2022 statistics.

A property consultant who declined to be named said he is "not surprised" by the rise in the number of sick projects because the property sector, as with other sectors of the economy, had been decimated.

The housing sector has been slowing down since a 2012/13 peak due to prices that have gone beyond the affordability of most Malaysians.

Coupled with that was a large number of completed but unsold housing units and serviced apartments which, according to the latest figures from the National Property Information Centre, were valued at RM42.90 billion (RM22.45 billion for housing units on residential land and RM20.45 billion for serviced apartments built on commercial land).

The pandemic, which resulted in massive job losses and pay cuts, also affected sentiments, the property consultant said.

Higher cost, labour shortage issues

Sick projects may deteriorate further to become abandoned projects as experienced by Michael who said the Housing and Local Government Ministry is of the view that the project he bought into is "on the verge of being abandoned".

"We have a lot of worries about this project, there is no peace at all since the beginning. Besides the sleepless nights, many of the buyers also disagree on what to do," he said.

Property developer Masteron Sdn Bhd director Choy Kin Mann told a media conference on June 16, 2022, that prices of building materials have gone up by 50 percent and this is "affecting many developers".

Another developer who wanted to remain anonymous concurred, saying that the number of sick projects will rise further given the labour shortage and rise in the prices of building materials due to supply chain disruptions as a result of the pandemic and the ongoing Ukraine conflict.

"Construction materials are subject to market forces while the labour shortage needs the government to expedite (entry of) foreign workers," he said.

Many foreign workers left for their home countries after a series of movement control orders (MCO) were imposed in 2020 and 2021 to stem the spread of COVID-19.

"The damage is already done," the developer said.

Relook definition of sick project

While housing developers have their share of troubles, many buyers of sick projects who took up the two loan moratoriums in 2020 and 2021 are saddled with higher installment payments, according to Siti Hawa.

She is, however, relieved she and her husband did not take up the moratorium offers.

A developer who declined to be named said the government has to step in to look at the issue of sick projects. He said before COVID-19, 328 projects nationwide were categorised as sick. Now, three years later, there are 539 such projects.

He said the government should take into consideration the series of MCOs it had imposed and the declaration of emergency which affected the operations of businesses, including property developments.

National House Buyers Association honourary secretary-general Datuk Chang Kim Loong said one way to resolve the situation is to examine the statistics carefully given the stop-work orders imposed over the last two years during the pandemic.

"Perhaps, this aspect was overlooked and should be reconciled by the Housing and Local Government Ministry.

"The starting point is to relook how 'sick projects' are being defined by taking into consideration the various work stoppages over the last two years," he added. - Bernama

Source: NST.com.my

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