- “The established developers with over 20 years of experience and a history of successful project delivery pose a lower risk to homebuyers and should benefit from a streamlined development approval process.”
EdgeProp.my May 05, 2025
PETALING JAYA (May 5): The Real Estate and Housing Developers’ Association Malaysia (Rehda) Institute has called on the government to introduce a “Tiered Developer Classification System” as part of the licensing process to help curb abandoned housing problems.
“What we have proposed is a credit rating system for developers, differentiating experienced firms with strong track records and balance sheets from less experienced ones,” Rehda Institute chairman Datuk Jeffrey Ng Tiong Lip told EdgeProp Malaysia in an exclusive interview.
“The established developers with over 20 years of experience and a history of successful project delivery pose a lower risk to homebuyers and should benefit from a streamlined development approval process.
“In contrast, newer developers should face more stringent oversight, with the expectation that they will eventually build a positive track record,” Ng explained.
The Rehda Institute recently launched a research report titled “Abandoned Housing—Challenges, Insights & Solutions” in conjunction with its International Strata Symposium 2025 held here recently.
The report, officiated by the Housing and Local Government minister Nga Kor Ming, provides a comprehensive analysis of abandoned housing in Malaysia, examining its root causes and proposing practical policy recommendations to prevent future occurrences.
Check developer background before buying
“While project abandonment always leads to public blame on the developers, this is often a generalisation, unfairly associated with Rehda. In reality, the isolated cases of abandonment are typically caused by non-Rehda members,” Ng said.
He explained that conducting research on the abandoned housing issue was challenging, mainly because the detailed data on abandonments was scarce, but they managed to collaborate with the Ministry of Housing and Local Government (KPKT) to obtain official data, which they analysed independently and professionally. This has allowed them to provide actionable recommendations to the government.
Ng pointed out that there is a list of blacklisted developers on KPKT’s website, and at the most basic level, homebuyers must do their research and understand the background of the developers before purchasing any properties.
“If homebuyers were to buy homes in the top 30 and 50-ranked developers today, I’m sure the risk of abandoned projects would be minimal,” he added.
Majority of abandoned projects priced RM200,000 and below
According to the report, as at 3Q2024, a total of 30,371 licensed projects have been abandoned since the pre-1990s, and 66% of them or over 20,000 of them, are priced RM200,000 and below, comprising both affordable and standard housing.
However, Ng said that one of the main problems is the mandatory imposition of price-controlled units within the developments.
“Developers are mandatorily imposed with an affordable housing quota, depending on the state they are involved in. However, certain locations might not have the demand for affordable housing, which may cause a mismatch of supply and demand,” said Ng.
Even in cases where the location is favourable and the developers are reputable with a strong track record, their price-controlled units still face challenges, primarily due to buyer eligibility.
A key constraint for the developers is that potential buyers need to apply through the state government, which then provides a list of eligible individuals to the developers. This means the developers are not responsible for the initial screening. Consequently, the lists can sometimes be outdated and the developers may not get genuine potential buyers.
“Developers have shared instances where eligible buyers were actually high-income earners, perhaps due to their income status 10-20 years prior not being updated in the database.
“So, these individuals, having the financial means and finding the location and price acceptable, might register as eligible and purchase the property, even if they don’t necessarily need it for their own residence. They might then rent it out or use it for other purposes, such as housing their workers. Meanwhile, genuine potential buyers who can’t afford the property due to an outdated database are unable to purchase it.
“Furthermore, a mismatch can occur because the regulations, such as a blanket requirement for a certain percentage of price-controlled units (e.g. 30%), might not match specific location nuances.
“Therefore, the mismatch isn’t solely due to a lack of interest in buying. There might be interested buyers, but their preferred location might not align with the available price-controlled units,” Rehda Institute elaborated.
Selangor has highest number of abandoned projects
Of the 30,371 abandoned units, 16,770 are located in Selangor, making it the state in Peninsular Malaysia facing the most severe abandonment problems. This reflects the mismatch issue highlighted by Ng.
“The number of households earning an average of RM3,000 to RM4,000 is relatively lower in Selangor compared to other states. While the government has imposed price control strategies in housing development, affluent homebuyers are not interested in purchasing these properties. This causes a supply-and-demand mismatch in the property market, ultimately leading to abandoned units,” Rehda Institute research and education director Malathi Thevendran, said.
Rehda Institute suggested that in prime areas of Selangor, a blanket enforcement of affordable housing quotas, as applied in rural areas, may not be suitable. For example, Petaling Jaya, being an affluent area with a high-income population, might experience low demand for projects that include price-controlled units.
Unplanned requests from authorities hamper developers’ cash flow
As economic conditions evolve rapidly, they cause many challenges for developers to complete developments, especially since the process can take years, and things can change significantly within that period of time.
Malathi explained that cash flow is important in property development, which entails formidable sums to fulfil the mandatory imposition and construction costs.
Sharing an actual case study, Malathi said that one developer failed to complete its project because it did not have the financial means to fulfil a sudden requirement by the authorities to build an infrastructure that was not part of the developer’s proposed development.
“The project got abandoned because the local authorities required the developer to build a water tank to supply to the surrounding neighbourhood, and this imposition impacted the company’s cash flow. In the end, the developer had to walk away because they didn’t have the money to build a RM1 million infrastructure,” she shared.
Housing completion guarantee system proposed to shield Malaysian homebuyers
Another measure that Rehda Institute has proposed is 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 report shows that one of the housing guarantee systems in South Korea came into force with the establishment of the Housing Business Financial Cooperative in 1993. It was introduced to protect homebuyers from potential risks associated with the pre-sale housing model.
Fast forward to the present, the cooperative has converted into a public limited company named Korea Housing and Urban Guarantee Corporation (HUG) with US$586.1 million (RM2.62 billion) in capital. The establishment of HUG marked a pivotal shift in the housing guarantee function, transitioning from a private sector-led model to one managed by the public sector, protecting homebuyers and ensuring the completion of housing projects.
For the record, HCGS is not a new proposal, and was in fact mooted by Rehda Institute about 10 years ago, with proposed funding sources from the government, banks, insurers, developers, and other stakeholders. However, the idea has yet to materialise.
“Given KPKT’s commitment to resolving property abandonment, Malaysia could adopt and adapt South Korea’s successful housing guarantee system. If a public sector agency manages such guarantees there, what prevents the Malaysian government from establishing a similar body? We urgently need to implement such a mechanism to safeguard homebuyers,” Ng urged.
