Unlocking abandoned projects 

THE long-running issue of abandoned housing projects is prompting a rethink of Malaysia’s housing delivery system.

At the end of October, 105 housing projects remained abandoned, leaving thousands of buyers in limbo – a slight decrease of two projects compared to the previous month.

A project is classified as abandoned if it falls significantly behind its sales and purchase agreement timeline and shows minimal activity for over six months.

It may also be deemed abandoned if a winding-up petition is filed under Section 218 of the Companies Act 1965 or if the company is placed under a receiver and manager.

In addition to abandoned projects, there are others categorised as sick or delayed. These categories represent different stages of distress in the construction process that could eventually lead to abandonment, according to experts.

The good news is that figures across all three categories have declined, as reported by Bernama on Nov 25.

This improvement is attributed to the efforts of the Task Force on Sick and Abandoned Private Housing Projects, working alongside stakeholders.

Key actions by the Housing and Local Government Ministry include blacklisting developers and company directors responsible for abandoned projects.

Between December 2022 and September 2025, the government successfully revived 26 abandoned projects, according to a report.

However, experts emphasise the need for strong measures to avoid future failures. They note that government intervention often serves as a last-ditch effort to salvage such projects.

Datuk Chang Kim Loong, honorary secretary-general of the National House Buyers Association (HBA), highlights that under the sell-then-build (STB) system, homebuyers bear most of the risk.

They often pay deposits and progressive payments for properties that face delays or remain unfinished. He advocates transitioning to the build-then-sell (BTS) 10:90 scheme to address these recurring issues.

The 13th Malaysia Plan unveiled in August had proposed the adoption of the BTS model, to be enforced through amendments to the Housing Development Act.

Under the BTS 10:90 structure, buyers pay 10% upfront and the remaining 90% upon completion, limiting their maximum loss to the 10% down payment if a project is abandoned.

In late October, Housing and Local Government Minister Nga Kor Ming stated that both the BTS and STB models would co-exist, enabling a blend of strategies in the housing market.

While the BTS model minimises risks for homebuyers, experts highlight significant funding and working capital challenges for developers, particularly smaller firms with limited financial resources.

“The STB model allows developers with less capital to enter the market, which in theory promotes competition and housing supply. It is seen as a level playing field, and has made housing more affordable.

“On the other hand, house prices under the BTS model would likely be more expensive as the developer’s cost of capital (interest and loan) and the risk premium would likely be included in the final selling price,” Olive Tree Property Consultants chief executive officer Samuel Tan tells StarBiz 7.

The Malaysian property market is highly price-sensitive, with buyers often choosing the cheapest option, even if it involves higher risks.

This could also limit the number of projects a company can handle simultaneously, potentially impacting housing supply.

“Buyers are accustomed to purchasing ‘off-plan’ at a lower price, expecting capital appreciation upon completion.

“The STB system facilitates this. Under BTS, a completed unit is sold at market value, removing the potential for ‘early-bird’ gains,” says Tan.

Notably, homebuyers already have access to BTS-style purchases in the secondary market.

In an Oct 30 statement, the Real Estate and Housing Developers’ Association said 80% to 85% of annual housing transactions take place on this basis.

It said BTS has been an option made available to developers, and it “encourages capable developers to consider it, should they have the means to do so”.

Tan says projects often fail due to financial and management weaknesses, planning errors or external shocks.

Common triggers include cash-flow problems, cost overruns, inexperienced developers, internal disputes, delays in approvals, land complications and disruptions from situations such as the Covid-19 pandemic.

Tan says reviving stalled or abandoned housing projects is challenging, but it is a process with established strategies and experienced players who regularly handle such cases.

“A primary mechanism is the Companies Act 2016 which provides for schemes of arrangement or judicial management to rescue a company.

“For housing developers, the Housing Development (Control & Licensing) Act 1966 (HDA) gives the ministry the power to monitor and intervene.”

Blacklisting developers and freezing their HDA accounts are only part of the solution, he adds.

“Before issuing developer licences, the ministry should carry out both qualitative and quantitative assessments to ensure developers are financially stable and experienced.”

Tan also calls for stricter licensing requirements using a tiered system whereby developers can only undertake projects of a scale that matches their financial strength and track record.

RKN & Co’s Datuk Raveendra Kumar Nathan explains that the government’s intervention to revive abandoned housing projects depends on fund availability, without which, projects can remain stalled for longer periods.

Reviving these projects also becomes more complicated, as private players such as liquidators or receivers must step in without government support, making the process slower and more challenging, he adds.

RKN & Co is an offshoot of Rimbun, a boutique firm specialising in corporate recovery, rehabilitation of abandoned projects and conveyancing matters.

Raveendra tells StarBiz 7 that the typical process for reviving a project usually involves an initial study by an insolvency practitioner, either a liquidator appointed when a company is wound up or a receiver appointed by a bank.

This study examines three key areas: legal, technical and commercial.

The legal review covers aspects such as land titles, development approvals, joint-venture agreements, and whether premiums have been paid.

The technical assessment looks at the structural integrity of the buildings, compliance with development orders, and the percentage of work completed.

Finally, the commercial review evaluates the feasibility of completing the project.

The duration of the study depends on the availability of information, meaning some projects can take years to assess.

On the delivery model, he believes a practical, holistic approach is essential.

In Australia, for example, the typical model for housing is BTS.

The government’s role is to provide key infrastructure first such as roads and utilitie to reduce risks for developers.

It is more complex in Malaysia, as developers often face additional processes, having to deal with a number of authorities before getting approval, he adds.

Challenges also often arise when the landowner and developer are separate entities, typically linked through a joint-venture agreement. Because if one party cannot proceed, the other may be left in a difficult position.

“To address this, a special purpose vehicle (SPV) can be formed, in which both the developer and landowner hold shares.

“The SPV would hold the development licence, effectively combining ownership of the land and the right to develop, reducing the risk of delays or abandonment caused by disputes between separate parties,” Raveendra says.

For land transfers to an SPV, the government could consider a stamp duty exemption if the proprietor receives shares instead of cash.

As the developer fulfills the proprietor’s entitlement under the joint-venture agreement, the proprietor’s shares would gradually revert back to the developer, he adds.

Proactive bank oversight is another measure.

“Banks should actively monitor progress claims, perhaps via a quantity surveyor to inspect sites and verify that work matches claims before releasing payments.”

Another method is the use of escrow-like drawdowns, where an independent third party manages the disbursement of funds from the project account as opposed to the current practice of it remaining at the discretion of the developer.

Progressive payments can only be released to developers after independent verification of actual physical progress of the project, Raveendra says.

However, legislation alone cannot address the issue of abandoned housing projects, says HBA’s Chang.

Effective and consistent enforcement is crucial, as the lack of action against non-compliant developers highlights the gaps in current measures.