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Saturday, February 19, 2011

Proposals to reduce number of abandoned housing projects

The special task force to facilitate business (Pemudah) is suggesting ways to further reduce the number of abandoned housing projects in Malaysia.

As at June 30 2010, there were 423 housing projects that were being monitored by the Ministry of Housing and Local Government (MHLG). The projects are either delayed, ailing or abandoned.

In taking those responsible to task, MHLG has implemented stiffer actions by compounding and prosecuting errant developers and blacklisting some.

Under its 2010 annual report, Pemudah is proposing new ideas, which include raising the deposit required to get a developer's licence from the current RM200,000 by 5 per cent.

It also wants to make it 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.

"The government has intentions to review the deposit. One of the proposal is to increase 5 per cent of the construction cost.

"This will ensure only good developers enter the market," said Datuk Abu Bakar Hassan, deputy director-general (development) of the National Housing Department under MHLG.

On the BTS scheme, Abu Bakar told Business Times that the government is studying if it should be made mandatory.

Under this scheme, a buyer would pay 10 per cent down payment for a property, and the rest, after the project is completed.

But developers are complaining as they would have to build the properties with no assurance that buyers would stay, he said.

Abu Bakar said projects are often abandoned as a result of mismanagement, financing issues, mismatched development components and fraud by developers.

"Rehda is proposing that insurance companies take on the risk to protect buyers, if a project is abandoned. The issue is whether they are willing to do it," Abu Bakar said.

By Business Times

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