Reviving Abandoned Projects (Part 2)
The presence of many abandoned housing projects in the country has given great anxiety to various parties, including buyers and the Federal Government. Under the Government Transformation Program Roadmap, one of the ministry's KPI is the revival of abandoned licensed private residential project and it targets to revive at least 35 projects by year end. In order to achieve this, the ministry had taken steps to engage the existing developers to help them overcome whatever challenges they may be facing.
They are also considering designating new developers, if need be, to revive these projects. The ministry had managed to revive a total of 51 out of 155 abandoned projects to date. There are another 57 abandoned projects that are currently in the process of being revived. The ministry also act as a mediator in reviving these housing projects. Rehabilitation of abandoned housing projects are done through existing developers, assistance from the selected white knights and members of the REHDA and also through the government allocated funds that is conducted in accordance to the tender process.
To counter errant developers, the ministry has increased enforcement action taken against errant housing developers by compounding and prosecuting them under the Housing Development Act. The ministry will also blacklist developers and their directors if all attempts to engage them fail. Improvements to existing legislation are being carried out through proposed amendments to provisions under Act 118. This will allow for the prosecution of developers who neglect their housing project or cause a housing project to be abandoned.
The Real Estate Housing Developer Association (REHDA) is also working on a formula designed to prevent the abandonment of housing projects. Under the proposed amendments to the Act, aimed at protecting home buyers and enforcing stricter standards on the housing industry, the deposit for a developer's license may be based on a percentage of the developing cost of a housing project and errant developers may also be hauled to court.
Reviving abandoned housing projects is no easy task as it requires the support of stakeholders, particularly purchasers who in most cases have to top up on the prices that they agreed to pay, mostly in the range of 10% to 30% depending on how long the projects have been abandoned and at what stage, according to a receiver of Sri Impian Condominium in Brickfields which has been successfully revived. The extra payment was necessary as prices of construction materials and other costs have gone up since the sale and purchase agreement, in addition to inflation and rising cost. It is very critical for the purchasers to support the revival scheme as without it, the project manager and receiver would not be able to collect progress payments as no contractor and the receiver would not do it for free whilst the bank would not give bridging loan. Although buyers needed to concede something, they would still win in the end as once the project is completed they could recover their money by selling the property at higher price.
Completed Sri Impian Condominium
The Sri Impian Condominium project was suspended in 2000 with just 10 floors of the 28-storey building completed. The developer, Li-Foong Housing Development Sdn bhd, despite having an almost sold out project, abandoned it in 2000 after facing a credit crunch due to Asian financial crisis as it was also involved in another project. Although the purchasers had to pay extra RM20,000/- to RM30,000/- from the original SPA price of RM300,000/-, the transacted price for standard unit (1496 square feet) within the scheme now is between RM420,000/- to RM500,000/- per unit.
The Government has also appointed Syarikat Perimahan Negara Berhad (SPNB) through the Ministry of Finance and under the supervision of the Ministry of Housing and Local Government as the implementation agent of abandoned of for the Rehabilitation Project of Abandoned Housing Project with the aim to oversee and restore abandoned projects all over the country. The Minister of Finance approved the financing of the rehabilitation works on the 7 November 2001. Finance start at RM 300 million in terms of a no-interest loan was given to SPNB in January 2002. The objective of the Restoration Project carried out by SPNB is to complete the abandoned project and handover the proper property ownership deed to the buyer.
SPNB has so far revived and completed 77 stalled projects involving 24,326 housing units nationwide. It had revived 23 projects involving 11,081 housing units covering a total of 191.16 hectares by providing financial assistance while the other 54 projects involving 13,245 housing units through advisory services. One of the many project which has been successfully revived by SPNB is Taman Kenanga in Bandar Salak Tinggi. The project, developed by Kumpulan Sepang Utama Sdn Bhd and Lengkap Lagenda Sdn Bhd, began in 1998 and was initially projected to be completed by 2002 however it was abandoned few years later due to financial constraints.
Abandoned Kenanga Apartment Revived Kenanga Apartment
Another example of revived abandoned project is the Subang USJ19’s Rhythm Avenue. The massive project was launched in 1998 but the development was abandoned in 2001. The project was 90% complete, but the financial woes of the then developer Sanjung Utama Sdn Bhd caused work to stop. The company is a subsidiary of YCS Corp, which was de-listed from the Kuala Lumpur Stock Exchange in 2005.
Rhythm Avenue had been planned as a modern serviced apartment-cum-retail/commercial development to cater for the increasingly popular and fast-developing USJ area in Selangor. After it was abandoned, it took the concerted efforts of several people and organizations, such as apartment buyers’ committee chairman Pritpal Singh, former Subang Jaya assemblyman Datuk Lee Hwa Beng, PricewaterhouseCoopers (project receiver) and AmBank (bridging financier) to revive the project.
Rhythm Avenue, which sits on about 10 acres of commercial land, is situated along Persiaran Kewajipan after Summit USJ and near Lebuhraya Damansara-Puchong. When launched, it offered three blocks comprising 886 serviced apartments, with sizes ranging from 558 to 1,308 sq ft. Tagged at between RM90,000 and RM170,000, the units were quickly snapped. Later, an additional tower was built, adding 150 units that were sold for between RM68,800 and RM148,800. All in all, Rhythm Avenue now has 1,036 units. The 227 retail lots in the development were sold at RM96,000 each in February 2000. All the lots were taken up within one month, according to PA International Property Consultants (KL) Sdn Bhd. When it was abandoned, the Housing Development (Control and Licensing) Act 1966 did not cover serviced apartments built on land with commercial status. This meant purchasers had to fend for themselves in cases of defaults or if the projects were abandoned. When Rhythm Avenue was abandoned, many buyers had to continue servicing their loans. Those who stopped their installments were blacklisted by financers. Others were slapped with accrued interest. Later in 2007, the then Minister of Housing and Local Government Tan Sri Ong Ka Ting, who was concerned about the rights of the purchasers and the plight of victims of abandoned projects, had the Housing Development (Control and Licensing) Act 1966 amended to provide protection for buyers of homes built on commercial land.
SM-Mahasalam Land Sdn Bhd was elected turnkey contractor for the revived project, with Sanjung Utama completely out of the picture. To finance Rhythm Avenue’s revival, each homeowner had to pay an additional 15% over the original prices. About 75% of the buyers contributed and construction resumed in 2006. The remaining 25% who did not contribute to the project had their units disposed of. According to the buyer’s committee chairman, many units were redeemed from the bank and resold. Some were auctioned off for non-payment and some were given to the contractor in lieu of payment.
The abandoned Rhythm Avenue The completed Rhythm Avenue