IN a previous article, FocusM had highlighted the seriousness of this issue with large number of property buyers left stranded with unfinished projects.  

Not only are end-consumers severely affected by this phenomenon but given that the property sector plays a critical role in the nation’s economy, it is imperative that it wakes up from its slumber to aid the nation’s post-pandemic economic recovery.  

Apart from being a large employment generator, the performance of the real estate segment has strong bearings on consumer sentiment. Housing also has significant socio-economic implications. 

Late last year, the Housing and Local Government Ministry highlighted the seriousness of this issue when it was revealed that there were 79 abandoned housing projects involving 17,724 housing units in Peninsular Malaysia, affecting 11,824 buyers. 

Addressing parliament, Housing and Local Government Minister Datuk Seri Reezal Merican Naina Merican cited a number of reasons that led to these abandoned projects.  

These included weak financial credentials of the affected developers as well as weak project viability. Of the former reason, Reezal Merican said that 65 projects were abandoned due to weak financial position of the developers involved.  

A high-profile example of developer being unable to complete a project is that of Empire Remix 1.  

Occupying prime acreage in the mature and affluent neighbourhood of USJ1, Subang Jaya, the Remix 1 project has stalled due to its developer Mammoth Empire Holding Sdn Bhd facing financial difficulties.  

Aside from being a very visible eyesore, the Remix 1 project has left many purchasers in limbo and is also affecting the property values of the locale.  

The minister also said other reasons for these abandoned projects include failure to comply with standards and weak project management.  

More worryingly, some of these errant developers cannot be traced, having folded operations when unable to fulfil their obligations as developers.  

An academic study conducted in 2010 entitled ‘Abandoned Projects in Malaysia – A Study of the Causes’ by Eng Hoe Yap and Hai Chen Ten cites the failure of developers’ strategic planning aligned with subcontractor shortcomings as key contributors in the rise of abandoned projects.  

As a possible solution, FocusM is recommending the authorities consider the “White Knight” route, allowing or encouraging developers of reputable standing to rescue abandoned or sick projects.  

Such a move will allow developers with unblemished track records and strong financial foundations to revive projects, undertakings which are usually costly and require massive injection of funds.  

Established developers will also be less likely to disappear as they have their reputations to protect, especially if they are public listed entities.   

Public confidence will also be buoyed as there is greater transparency with companies listed on the KLSE and property investors can better gauge the financial health of these “White Knights”.  

Having property developers with strong financial foundations does not necessarily mean only involving the big players. Those with impeccable delivery records and display keen sense of strategic planning in past projects should also be considered for the role of “White Knights”.  

The above reasons make it logical that authorities give the “White Knight” solution some credence, given the dire state the property market finds itself in.  

Since many established property developers have flourished, FocusM is advocating that the time is right for them to do their part in rescuing not just abandoned projects, but the construction sector as a whole. – Aug 17, 2022 

https://focusmalaysia.my/rescue-act-required-to-save-abandoned-projects/