News and Views

Proposed ‘Urban Renewal Development Act’ is opening another can of worms, says HBA

December 1, 2023
MALAYSIA
Datuk Chang Kim Loong is the Honorary Secretary-General of the National House Buyers Association

OPINION: Is the Ministry of Local Government Development (KPKT) capable of monitoring and taking on the challenge of the proposed Urban Renewal Act on the pretext of redevelopment, rejuvenation, revitalisation, and en-bloc sale? Especially with the current spate of late, sick and abandoned housing projects (collectively referred to as ‘problematic projects’),? The statistics speak volumes of the happenings.

Resolve long-standing plights of homebuyers

The National House Buyers Association (HBA) would like to see solutions to our long-standing woes – solutions that will truly lead to a better Malaysia:

  1. Tangible actions by the governing and licensing authority ie Ministry of Local Government Development (KPKT) to resolve project abandonment issues instead of merely recategorising them as delayed and sick projects before declaring them as ‘abandoned’;
  2. Timely handovers of projects without cowing to the pressures and demands of industry players to grant extensions of time (EOTs) arbitrarily at the expense of denying homebuyers’ rights to receive statutory compensations for such delays;
  3. Stricter actions to prevent defective, substandard materials and poor workmanship;
  4. A more balanced financing system that will not burden ordinary homebuyers to lifelong repayment terms with an interest rate that is higher than our average salary increment without the possibility or ease of terminating the arrangement even when faced with abandoned housing problems;
  5. Deterrent controls against errant housing developers who have the habit of ‘scheming’ to wind themselves up to avoid their contractual and statutory obligations;
  6. Strict monitoring, supervision and enforcement of the Housing Development (Control & Licensing) Act and its Regulations. There is a dire need for an enforcement program by KPKT;
  7. Pre-emptive measure (must be adopted) and safety net (to be cast) to avoid future abandonment of housing projects; and
  8. The dirty feeling associated with the word: ‘ABANDONMENT’ and the beginning of the nightmare for the victims of abandoned housing projects.

MADANI Government announcement of Budget 2024 on 13 October 2023

“Bagi memudahkan pembangunan semula skim strata, ambang persetujuan Penduduk untuk jualan en-boc akan dikurangkan daripada 100% kepada tahap yang konsisten berdasarkan amalan antarabangsa seperti di Singapura. Ini akan menggalakkan pembaharuan semula Bandar dan menggalakkan pembangunan semula bangunan usang di Bandar”

First and foremost, ‘Penduduk’ (residents/ occupants) have no say in any dissolution of stratified properties or en-bloc. The rights and entitlement rest with the owners (whether registered or having beneficial interest).

HBA strongly opposes any setting of a “consent threshold”, save and except 100% participation. HBA’s stand is that any redevelopment, rejuvenation or renewal plan must receive the consent of all because every single owner is important.

No rightful homeowner should be disadvantaged in any scheme in the name of redevelopment, rejuvenation, en-bloc or revitalisation when there are plenty of reasons such a move is unnecessary. Projects that take away citizen’s rights have far-reaching effects, notwithstanding how good they may be.

While some quarters have viewed this proposed Urban Renewal Act as a step in the right direction, HBA reiterates this is a regressive move because it would become an unconstitutional piece of law that circumvents Article 13 in our Federal Constitution, which stipulates the rights to own property in this country.

Proceeding with a “consent threshold”, or better known as “en-bloc sale” with any rate of majority vote will deprive certain homeowners of their properties. As such, the purported redevelopment law will be in blatant contravention to Article 13 of the Federal Constitution, and the passing of such a law will not legitimise it. And if we are not careful, the potential redevelopment law could also be extended to cover landed non-strata schemes.

Good examples from Singapore and Hong Kong?

The Government has pointed out that the rates for the “consent threshold” are much lower in certain developed countries. The previous government administration also took Singapore as an example to justify enacting this law, but they did not consider Singapore’s circumstances.

HBA has explained numerous times that there is only leasehold land for existing buildings in Singapore and Hong Kong, and new development land is scarce on the islands.

In Malaysia, we have both freehold and leasehold land, but what is more glaring is that we have significantly more land masses compared to Singapore and Hong Kong. The latter two were ranked as the world’s third and fourth most densely populated countries, respectively, while Malaysia was ranked far behind at 46th, based on the United Nations’ data as of 2021.

While en-bloc sale is arguably a necessary evil in Singapore and Hong Kong due to the pressing need for urban redevelopment, this argument does not apply to Malaysia.

Percentages that have been touted by industry players emulating overseas countries are: 90% for buildings less than 10 years old; 80% for those between 10 and 20 years old; and 75% for those above 20 years old.

Revival is one thing; being able to occupy physically is another

The statistics of problematic projects are mounting, and even the Deputy Minister of Housing had remarked in his past press statement as a ‘scary’ situation.

In the Budget 2024 speech by our Prime Minister, it was declared that as of August 2023, a total number of 256 ‘sick projects’ or more than 28,000 units of houses have been revived, involving an estimated development value of RM23.37 billion.

Implementing a revival process does not tantamount to successful revival. Until and unless the Certificate of Compliance and Completion (CCC) has been issued and physical vacant possession has been delivered with keys and water and electrical ready for tapping to the affected owners/ victims is then deemed completion per se. On top of that, there is still the issue of ownership papers, i.e. strata titles for stratified property and title deeds for landed property.

Special task force (STF) made up of failed gatekeepers?

Back to the current STF under the current Minister, HBA’s concern is that it may be made up of the very people entrusted to license, monitor, police and enforce the Housing Development (Control & Licensing) Act and its’ regulations. If they have failed miserably in their gatekeeping role, how can they now be entrusted to revive sick and abandoned projects?

What is crucial is a safety net to pre-empt future project abandonment. Let’s acknowledge the fact that there is no solution to abandoned housing projects. We just have to prevent it from happening.

And it’s not that we don’t have sufficient laws. Look at the current Section 7(f), Sections 10, 11 and 12 of the current Housing Development Act (HDA) legislation. What is lacking is supervision, policing and enforcement.

So, we hope the STF will not waste too much time on what has already been deliberated and worked on to pre-empt housing abandonment issues but be truly empowered to press the reset button once and for all.

Biting off more than you can chew

With the proposed ‘Urban Renewal Development Act’ coming under KPKT, we fear that the legitimate current owners of their respective property, which may partake in these ‘schemes’ may be worse off if the fate of abandoned projects befall them.

Not only do homeowners suffer. The Banks and the Government also get the sparks. The possibilities of devastating effects are as follows:

  1. Bare promises of 1 unit in exchange for 1 unit, whether contractual or otherwise, means nothing if the project fails and is abandoned. The owners will surely be left in the lurch like victims of current abandoned housing projects;
  2. Physical Buildings (now erected at the site) will be demolished in exchange for a bare promise and a ‘pie in the sky’;
  3. If the project of redevelopment falls through, what’s the use of costly and lengthy litigation in the Court of Law? The owner will continue to be house poorer in exchange for a dream;
  4. Property developer/ contractor/ builder normally, for good administrative sense, would set up separate companies/ subsidiaries/ associates to undertake new projects. In law, they are separate legal entities and if they go belly up, the mother company (syarikat induk) will not be liable. The affected owners will see their dreams vaporised;
  5. The owners who succumb to the redevelopment (under the pretext of urban renewal) would be crying and blaming the Government for the misguided structured legislation for their ill-fated scheme when those developers/ contractors/builders failed in their obligations;
  6. The adage holds true: ‘Property developers over promise and under deliver’;
  7. KPKT will continue to issue developer’s licenses but has a lackadaisical attitude towards monitoring and enforcement role, as in the current situation;

The question is whether KPKT is capable of handling the urban renewal development legislation when they has been much room for improvement in their role to safeguard the buyers of housing units under the current Housing Development (Control & Licensing) Act and its HD Regulation; HD (Project Account) Regulations and etc?  The current adverse statistics speak voluminously of their shortcomings. How then do you then account for the surmounting problematic projects?

Can the Government guarantee that there will be no abandoned and problematic projects in the future? There are clear insufficient efforts being made to halt and cease problematic projects coming on stream, which have, in fact, increased the statistical charts.

Maintenance Culture

We wonder why the government wants to encourage the knockdown of a good building structure when it is not certified ‘condemned’ by the engineer and the local council. Don’t they know that the average lifespan of an apartment is 50 – 60 years? An independent home ages much slower than an apartment building because the amenities and common services are shared among the community residents.

Their lifespan can be improved by carrying out regular maintenance. Regular maintenance and upkeep could preserve, restore, return and even rehabilitate dilapidated buildings through refurbishment. Let’s instill the efficient maintenance culture lacking in government buildings, public facilities and amenities.

This article is written by Datuk Chang Kim Loong, the Honorary Secretary-General of the National House Buyers Association: www.hba.org.my, a non-profit, non-governmental organisation (NGO) manned by volunteers. He was also a Councillor with the then Subang Jaya Municipality Council (now conferred Subang Jaya City Council status) from year 2008 – 2018.

Disclaimer: Any opinions expressed are entirely the author’s own and do not necessarily reflect the views of PropertyGuru and its entities.

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