AP2243G

CENTRE STUDIES OF QUANTITY SURVEYING

FACULTY OF ARCHITECTURE, PLANNING AND SURVEYING
UNIVERSITI TEKNOLOGI MARA (UiTM)
MAIN CAMPUS SHAH ALAM

BQS514 RESEARCH METHODOLOGY

ASSIGNMENT 1
(RESEARCH PROCESS)

Prepared By:
Hidayati Amminy Binti Ahmad Amminy (2020628578)

Prepared For:
Prof. Datin Sr. Dr Hamimah Adnan

Remarks:
TITLE: The Factors of Abandoned Housing Project in Construction Industry in Malaysia

1.0 KEYWORDS: Abandoned, Housing project, Construction Industry

2.0 INTRODUCTION

Abandoned housing project is a worldwide topic. Malaysia has been well known with
the issue of abandoned housing project that remains unsolved every day. The news about
this topic has been displayed in the daily newspapers because it is spread across the nation
(Damoah et. al. 2018). Every parties are blaming each other and refuse to take responsibility
over this matter. The government blamed by the homebuyers due to its failure to enforce the
law to developers. On the other hand, the developers blamed the bankers and the local
authorities. The local authorities blamed the architect and the building engineers of their
failure to submit the report work progress on the ongoing projects (Daud et. al. 2017).

Abandoned housing project is defined differently by the stakeholders of a housing

development project. For instance, it is defined as a project that stopped due to some
problems which can relate with financial problems or even worse, the developer himself
disappear from the project. Furthermore, from the planning point of view, the term
abandoned project refers to a project in which the construction work has been postponed,
even though planning permission has been granted to the developer. (Nzekwe et. al. 2015,
cited in Adebisi et. al 2018)

The definition of abandoned projects by the Ministry of Urban Wellbeing, Housing

and Local Government (MHLG) is more detail and comprehensive. According to the MHLG,
a housing project is abandoned when the projects are not completed within or later than the
delivery date stated in the first Sale and Purchase Agreement and no significant activity is
noticed at the construction site for six continuous months, or petition for winding up has been
registered in the High Court under Section 218 of the Companies Act 1965 or other related
laws, or the licensed housing developer is wound up and placed under Receivership,
Liquidator or the Malaysia Department of Insolvency (MDI), or licensed housing developer is
notified in writing to the Housing Controller that they are unable to continue further with the
development of the project, and certified by the MHLG under Section 11 (1) (c) of Housing
Development (Control and Licensing) 1966 (Act 118) that the housing project is an
abandoned project. (Arrifin et. al. 2019),

According to the National Housing Department under the Ministry of Urban

Wellbeing, Housing and Local Government (MHLG), as of 31 March 2017, there were about
64,290 housing units that had been declared Abandoned Housing Projects in Peninsular
Malaysia. The units were in 253 housing projects and involved about 43,538 home buyers.
Of this number, about 188 housing projects (74.3 per cent), involving more than 48,000
housing units, have been resuscitated, while the rest (25.69 per cent) are still under the
revival process (Mikail et. al. 2018).
3.0 PROBLEM STATEMENT

1) Default of developer
The abandonment of one housing project can occur many negative effects. The main
stakeholder that need to carry on the responsibility of this matter is the developer. In the
process of construction management that leads to few liquidity crises is because of the lack
of adequate financing (Alao and Jagboro, 2017 cited in Adebisi et. al 2018). Because of that,
the developer will fail to carry on the construction cost and repay all the loan and end up
leads to the abandonment of the project. According to Mikail et. al (2018), the developers
have many reasons for defaulting. There is no way that developers plan to abandon a
housing project. The cash flows problems that always frustrate the completion of a project.

According to Daud et. al (2017), the developers are unable to run the construction
project due to sufficient fund, to pay wages, to hired qualified project managers or even to
complete the housing project. Even though the developers use the purchaser money which
is 20 per cent to take off the construction work, but still the developer need fund from
bridging loan which is from the banks. This cash flow problem increases due to the
developer may need to have at least an 80 per cent sales percentage to obtain the bridging
finance. Improper feasibility studies and market research and lack of financial management
are also argued to have resulted in delay or non-payment of contractors, suppliers and
workers. These factors put up to developer default. (Mikail et. al 2018)

Based on Arrifin et. al. (2019), compared to other countries, it is very easy in Malaysia to
get developer’s license. So, there are a lot of unqualified developers who got the license.
Selling the houses while they are in reality not qualified financially and capability wise. So
basically, they are small companies with a very small fund but what they do is to collect 10
percent from each house purchaser and invest in other projects. The issue of abandoned
housing is burdensome not only to the homebuyers but also to the government and the
society. For instance, home owners are required to pay back the loans despite the fact that,
there is no guarantee of completion and handing over of the house.

2) Sell then build concept

The study conducted by Daud et. al. (2017) discovered that the current housing system
of sell then build that had been practice in Malaysia also accounts for the abandoned
housing project. The sell then build system allows small developers to start work early. This
apparently has positive results for the socio-economic development of the country and it
provides affordable housing for all. However, Arrifin et. al. (2019) stated that it shown to be
sustainable due to the high frequency of delay and abandoned housing project. This system
has been blamed for the rising cases of abandoned housing because it put the house buyers
at the mercy of the developers.

According to Mikail et. al (2018), the developer will be the primary beneficiary as he gets
quite large financing even before the house delivered. At the meantime, the developer has
no direct financial obligation to the bank except when bridging finance has been obtained.
The bankers seem to favorably declined to the present of sell the build arrangement due to
the financing contracts involved allow them to claim from the customers even if the
developer fails to deliver. Furthermore, the bank would also deal with customers by buying
and selling an existing asset which is build and sell concept.

In support of the above argument, Arrifin et. al. (2019) said that the house buyers are the
immediate victims in the event of abandoned projects. The house buyers bear the business
risk that is supposed to be carried by the developer. The developer takes less measure on
how to prevent this issue. This causes to lack of feasibility studies and mismanagement of
financial resources. Notwithstanding the project is abandoned, the house buyers are bidding
to service the bank loans. There are cases where the developers use substandard materials
that causes leaking roof and uneven flooring. This has been made possible due to the
delivery system whereby developers receive money before completion of the project and
lack of law that protect the house buyers for such breach of contract.

3) Regulatory system of housing projects

Another main factor of abandoned housing project is lack of effective regulatory system.
As indicate by Arrifin et. al. (2019), lack of amends insurance, no special justice for home
buyers to claim, lack of effective planning and land policy significantly contribute to
abandoned housing projects. The existence of an effective special tribunal whereby errant
developers will be penalized could serve as a deterrent to others. This may thus make the
developers to take proper measure that could lead to the abandonment of the project. Some
nature of the regulatory system such as ambiguous relationship between federal, state and
local level, delay in the process and approval of application for land development,
conversion, subdivision and issuance of titles that contribute to abandoned projects.

Moreover, Daud et. al (2017) stated that housing provision in Malaysia is highly
regulated and it govern by so many legislations. the private developer must comply with
Building Standard (UBBL) 1984 due to the building standard and safety. It is compounded by
the fact that separate laws, policies, and controlled by federal, state and local government
separately. The developers must confront on the development approval from the authorities.
The complexity and hurdles of the development approval by stating that all the relevant
arrangements in housing developments such as land conversion for housing, building and
structure plans must be approved by federal and state agencies.

Ministry of Urban Wellbeing, Housing and Local Government (MHLG) seems to be very
lenient in providing license to the house developers. On the other hand, there is lack of legal
provision regulating loan and repayment of loan which allows lenders to abuse and misuse
their power to the detriment of the borrower developers. According to Adebisi et. al (2018)
structural failure will definitely cause project cost overruns due to the need for rework or
massive reconstruction of affected sections and thereby elongating the proposed project
duration. Thus, it is highly imperative for the regulatory authorities saddled with the
responsibility of ensuring quality compliance in building projects execution to give special
attention to housing projects.
4.0 AIM

To identify the causes of abandoned housing project in Malaysia.

5.0 OBJECTIVE

1) To identify the factor of abandoned housing project in Malaysian construction

industry.
2) To determine abandoned housing project affects the stakeholders in Malaysia.
3) To propose ways to overcome the abandoned housing project in Malaysian
construction industry.

6.0 RESEARCH QUESTION

1) Why there are many housing project in Malaysian construction industry getting
abandoned?
2) What are the effects of abandoned housing project towards the stakeholders in
Malaysia?
3) How to overcome the problem of abandoned housing projects in Malaysian
construction industry?

7.0 SCOPE OF RESEARCH

The scope of research will be focusing on the the housing project in Malaysia that
has been abandoned. The purpose of this study is to identify the causes of abandoned
housing project in every aspect from the highest management to the site labours. The
geographical location of this study will take place in Malaysia especially in Kedah.
8.0 REFERENCES

Adebisi, E. O., Ojo, S. O., & Alao, O. O. (2018). Assessment of factors influencing the failure
and abandonment of multi-storey building projects in Nigeria. International Journal of
Building Pathology and Adaptation.

Ariffin, N. M., Razak, D. A., & Imtiyaz, M. N. M. (2019). Perception of Stakeholders on

Abandoned Housing Projects in Malaysia. International Journal of Islamic Economics and
Finance (IJIEF), 2(1), 131-148.

Damoah, I. S., Mouzughi Y., & Kumi, D. K. (2018): The effects of government construction
projects abandonment: stakeholders’ perspective, International Journal of Construction
Management

Daud, W. H., Zainol, F. A., & Mumin, M. H. (2017). What Causes Abandoned Residential
Housing Projects in Malaysia? An Insight from Economic and Management Perspectives.
International Journal of Academic Research in Progressive Education and
Development, 6(4), 17-17.

Mikail, S. A., Kasri, N. S., Elatrash, S. R., & Adewale, A. A. (2018). Framework for financial
hardship indebtedness management in abandoned housing projects in Malaysia. ISRA
International Journal of Islamic Finance.