04/06/2026

THURSDAY | JUNE 4, 2026

10

COMMENT by Datuk Chang Kim Loong

Housing reform must focus on buyers T HE idiom “missing the forest for the trees” aptly describes the recent pro posals from the Real Estate and Housing Developers’ Association (Rehda) on addressing abandoned housing projects in Malaysia. These cases demonstrate the failure of the STB system to adequately protect homebuyers when developers default.

Rehda’s proposals and HBA’s response Rehda Institute has proposed several measures to prevent or recover abandoned projects, including: 1. A tiered developer classification system– ranking developers by financial strength and track record. 2. A government-led housing completion guarantee system (“HCGS”) to protect the homebuyers from financial losses and ensure the projects are completed even in cases of developer insolvency. The recommendation by Rehda that homebuyers conduct due diligence before making a purchase, including checking developer backgrounds through the Housing Ministry’s “blacklisted developers” list, is not something new. However, even top-tier developers often use special purpose subsidiaries, entities or vehicles (“SPV”) to launch new projects. These SPV are financially insulated from the parent company. The current housing minister has recently proposed to “blacklist” the board of directors of those non-conforming developers. Those developers may set up separate companies to circumvent the stigma of “blacklisting”. Housing projects can also affect small and large property developers, and it would be misleading to imply that larger property developers are immune to abandonment. The idea of a HCGS may sound good in theory but what it means is that profits from the property projects are privatised (and belong to the respective property developer companies) and losses from the property projects are nationalised and borne by tax payers. It is HBA’s belief that the implementation of HCGS will encourage property developers to be more reckless and undertake more high-risk and potentially unviable property development projects on the notion that if such projects encounter financial difficulty, the government through HCGS, will step in to finish the project. Flaws in the STB model The STB model is flawed because it places most of the risk on homebuyers while offering them the least protection. Under STB, developers can collect progressive payments for work completed. For example, when a RM300,000

While the institute outlines several reasons for such failures and offers ideas to prevent or revive them, the proposals largely ignore the most critical issue – the need to protect homebuyers from falling victims. For the average Malaysian, owning a home is not just a dream but the largest financial commitment of a lifetime. It is because of this financial and emotional significance that the protection of homebuyers must be at the heart of any housing policy reform. There are two ways to purchase residential property in Malaysia: (a) Buying completed properties from existing owners, known as the secondary market. This also includes completed but unsold units still held by developers. (b) Buying under-construction or yet-to-be built properties directly from developers through the sell-then-build (STB) model, known as the primary market. Under STB, developers may sell units before construction begins or is completed, exposing buyers to significant risks. It is often described as a “buying a pie in the sky” model. The buyer signs a sale and purchase agreement (SPA) before construction is completed. The developer then issues progressive billings according to construction stages, which are paid by the buyer’s financing bank. In effect, the buyer begins servicing a loan for a property that does not yet exist. While most projects are eventually completed, some are not. When a project remains unfinished in 24 months (landed property) or 36 months (stratified property) beyond the SPA delivery date, it may be classified as “late”, “sick” or ultimately an abandoned housing project. Under Section 11(1)(ca) of the Housing Development (Control and Licensing) Act 1966, a project is deemed abandoned only when the minister certifies that the licensed developer has abandoned the development. For affected buyers, the consequences are devastating. The National House Buyers Association (HBA) has assisted victims for decades, including those involved in “legacy cases” abandoned for more than 20 years.

Under STB, the developer is allowed to sell the property to the buyer without having to complete the property or having to actually commence construction of the said property, which represents a potential risk.

completion, vacant possession and transfer of ownership; • developers finance construction through their own capital or project financing; • if a project is abandoned, the buyer’s maximum loss is limited to the 10% deposit; and • project revival becomes easier because only the developer’s financiers are involved, rather than hundreds of individual homebuyer loans. The BTS 10:90 model was intended to replace STB under the National Housing Policy 2018–2025, with a gradual transition towards a full BTS system. However, implementation remains optional and STB continues to dominate. As long as STB remains the prevailing model, homebuyers will continue to bear disproportionate risks arising from project failures. The most effective way to address housing project abandonment is not through more classifications, guarantees or recovery mechanisms but by reforming the development model itself through BTS or BTS 10:90. Datuk Chang Kim Loong is the secretary-general of the National House Buyers Association. Comments: letters@thesundaily.com

property reaches 20% completion, the developer may bill RM60,000. The buyer’s financing bank disburses the payment, leaving the buyer indebted even though the property is far from habitable. If the project is later abandoned at, say, 50% completion, the buyer may still owe RM150,000 while continuing to pay rent elsewhere. The buyer is also effectively locked out of obtaining another housing loan until the outstanding debt is settled. This creates severe financial hardship and emotional distress. The solution The most effective way to protect homebuyers is to reverse this risk exposure through the Build Then-Sell (BTS) model. Under BTS, developers must complete a property before it can be sold, ensuring buyers pay only for a finished product. Rehda has long argued that BTS would disrupt the property industry. HBA disagrees. The property sector would adapt, just as developers in other countries. The primary objective should be to protect homebuyers. As a compromise, HBA proposes the BTS 10:90 model. Under this approach: • buyers pay a 10% deposit and sign the SPA upfront; • the remaining 90% is payable only upon