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‘Minimise risks to housebuyers’

 | February 16, 2011

Proposed amendment to Housing Development Act 1996 does adequately cover housebuyers if projects are abandoned.

PETALING JAYA: The government should review the Housing Development Act (HDA) 1966 in a more holistic manner to provide better protection to housebuyers.

President of Abandoned Property Owners Malaysia, Mohamed Rafick Khan Abdul Rahman, said that at present, housebuyers have to bear all the risks should a housing project fail.

The recent proposed amendment by the housing and local government ministry does not take into account the risk-sharing elements. Thus, buyers have to bear the overall risk if a housing project fails.

“Therefore, we urge  the government to put the people’s interest first as housing project failures have caused untold misery, even to the extent of breaking up families,” said Rafick.

In December, Housing and Local Government Minister Chor Chee Heung said that the government would amend the HDA to allow authorities to prosecute developers abandoning housing projects.

Currently, the HDA does not provide specific provisions that will allow the authorities to take action against errant developers.

With the new amendments, the government hopes to revive failed low and medium-cost housing projects and implement stricter controls on new projects in collaboration with local authorities.

Rafick said that though the proposal was commendable, the new set of regulations should compel the buyer and the developer to share equitable risks.

He added that currently developers seemed to be bear minimal risks whenever housing projects failed.

“Even the ministry’s action of blacklisting errant developers do not seem to work as the directors hide behind the corporate veil.

“All the developers need to do is to create new companies using proxies as directors. We even had security guards acting as directors for a developer,” claimed Rafick.

“The new law must not only allow liabilities of property development companies be borne by directors of operating companies, but also by directors of its holding companies and guarantors.

“The government should also step in not only when a housing project is abandoned but also when it is delayed or ‘sick’ (having problems),” said Rafick.

More power to housing tribunals

Rafick said that the government should also introduce Islamic financing principles in housing projects as they had been proven to be successful in Canada and the Middle East.

“Under Islamic principles, the buyer needs to approach the bank and pay up a 10% non-refundable  deposit for the house.

“Upon completion of the housing project, the bank sells back the house to the buyer with a financing scheme under a separate sales and pruchase agreement.

“With this approach, the risks to the bank and the buyer are minimal and manageable. As banks normally act as an end-financiers, they can mitigate risks as they have the instruments at their disposal.

“Banks can easily revive any failed projects as they have the financial means to do so,” said Rafick.

He added that the government should also grant more power to housing tribunals to deal with disputes between buyers and developers as the litigation process in courts are complex and costly.

“It is also takes too much time to resolve the dispute in courts,” said Rafick.

“Therefore, the tribunal’s authority should be expanded and its decision made final and binding. Failure to comply with the tribunal’s decision should be dealt with swiftly and painfully,” he added.

As of 2009, there were 115,788 housing projects categorised as either delayed, “sick” or abandoned, an alarming 66% of the total housing projects in the nation.


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