Housing Industry In Malaysia Construction Essay

House is a basic need for human. This need must be fulfilling in order to make an individual live in good health and safety. Therefore, one of the social objectives in country development is to provide housing facilities to people not just to fulfil their basic need but also for economic growth of the country.

To meet the increasing housing need, ministry of housing and local government always make a review of housing policy to draft more compressive national housing policy. The matters that government take into consideration in order to undertake the housing project is as follows:

Need, demand and supply

Land for housing

Finance

Human resources

Technology, design of materials, standards

Law

Infrastructure, utilities and social services

Socio-culture, socio-politic and socio-economic

Research and development

Maintenance of development and infrastructure

Data centers and information of housing

These policies implemented based on the Eighth Malaysia Plan (2001-2005) and continued during the Ninth Malaysia Plan (2006-2010). In the Ninth Malaysia Plan, the development of housing sectors continues to be focused in order to provide adequate house to people.

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Population growth rapidly especially in urban areas due to demographic factors, rapidity of industry sector, increase of investment, financial system and technology encourage housing policy to be continued in Ninth Malaysia Plan. By 2020, the population of Malaysia is expected to increase to 32 million people or 65% of the resident in urban areas. Due to population growth, the need and demand for house is also expected to increase. Housing is the important strategic sector in economic, so is expected the housing investment will be concentrated in urban areas. In 1994, housing industry produces 7.3 billion outputs and contributes 12% to national income (Ali Azhar, 2000).

2.2 HOUSING INDUSTRY IN MALAYSIA

In providing housing, government and the private sector has an important social responsibility. This responsibility includes the provision of social infrastructure and a healthy environment for residents. This responsibility is important in order to overcome the problems such as poverty and solidarity among the people. Housing industry in Malaysia involve public (Government) and private sector and also joint venture between the two sectors to meet the need of all community in Malaysia. Therefore, housing development in Malaysia is implemented by the public and private sector (National Housing Department).

Housing provision for all community in Malaysia is carried out by public and private sector as follows:

2.2.1 Public Sector (Government sector)

Integrated public housing program

Project Perumahan Rakyat Bersepadu (PPR)

Housing Loan Scheme

Skim Pinjaman Perumahan (SPP)

Housing under the Land and Regional Development Agencies.

Perumahan Di Bawah Pembangunan Tanah dan Wilayah

Housing’s Economic Development Agency

Perumahan Kemajuan Ekonomi

Government Quarters

Perumahan Kakitangan Kerajaan

PPR and SPP program in public sector is provide especially for lower income group to achieve the government aims which is to improve the quality of life and combat the poverty problem. This program was undertaken by the Ministry of Housing and Local Government.

For the Housing under the land and regional development agency such as FELDA, FELCRA, KEJORA, KETENGAH and so on is establish for the purpose to provide a home or house for people involved in land and regional planning and also include the local resident who moved due to the opening of new agricultural areas, while state economic development cooperation (PKEN) and urban development cooperation (UDA) are involved in the development of commercial, industrial and construction. For the government quarters, the aim is to provide the housing facilities to the government employees especially for low-income employees.

2.2.2 Private Sector

Licensed Private Housing Developers

Perumahan Pemaju Swasta Berlesen

Cooperative Housing

Perumahan Koperasi

Special Low Cost Housing

Perumahan Khas Perumahan Kos Rendah (PKPKR)

Individual and Group Housing

Perumahan Individu dan Kumpulan

The housing that develops by private sector is like detached house, terrace, flat, apartments, shops and town house that consist of low, modest and high cost.

Special low cost housing is a special program implemented during the period 1986 to 1989. This program is a partnership between public and private sector. Federal government and state government plays a role in providing incentives as well as the facilitator for the developer who participate in the program, while the private sector involved in construction activities.

Individual and group housing include both formal and informal housing. Formal housing is housing that less than 4 units, and was develop with approval from local authorities, while not formal housing include the construction of residential houses without obtaining approval from relevant authorities such as traditional house, village house, squatters, labor camps and floating house (Elinawati, 2003).

2.3 LEGISLATIN IN THE MALAYSIA HOUSING INDUSTRY

Currently there are about 700 federal acts in force in many fields and certain condition. In Housing Development (Control and Licensing) Act 1996 is the key in controlling the activities of developers in order to protect the interest of home buyers. But there are other legislations that play an important role either directly or indirectly in the activities of housing industry. Therefore, all the weakness and imperfections of such laws will affect the housing industry. The following is a list of legislation that plays a role in the housing industry:

Housing Development (Control and Licensing) Act 1996 (act 118)

Town and Country Planning Act 1976 (act 172)

Roads, drains and building Act 1974 (act 133)

Town Planning Act 1995 (act 538)

Fire Service Act 1988 ( act 341)

Bank and Financial Institutions Act 1989 (act 372)

Contract Act 1950 (act 136) & Government Contract Act 1949 (act 120)

Environmental Quality Act 1974 (act 127) & Regulations and Orders

Land Acquisition Act 1960 (act 486) and the Rules & Ordinances Acquisition of Land (compensation)(special provision)1948 [P.T.M.Ord.21/1948)

Strata Titles Act 1948 (act 318)

Licensed Land Surveyor Act 1958 (act 458)

Quantity Surveyor Act 1967 ( act 487)

National Land Code 1965 (act 56/1965)

Additionally, by-law enacted according to Road, drains and building act is as follows:

Uniform Building By Law 1984

Earthworks By Law 1985

While the by-law under the Housing Development (Control and Licensing) 1966 are:

Housing Development (Control and Licensing) Regulations 1989

Housing Developers ( Housing Development Account) Regulations 1991

2.4 PARTIES INVOLVED IN THE MALAYSIA HOUSING INDUSTRY

In the housing industry, there are several organizations that play an important role as the Ministry of Housing and Local Government (KPKT) or local authorities, developers, contractors, professionals and home buyer (Leong Seng, 2001)

2.4.1 Ministry of Housing and Local Government

Ministry of Housing and Local Government was establishing on May 24, 1964 under the name of the Local Government and Housing. On July 18, 1978 the ministry has changed the organizations and reorganize under the name of Ministry of Housing and Local government. This establishment is the result of a combination of the ministry of housing and rural development with the local government which previously located under the Ministry of Local Government and Federal Territories (www.kpkt.gov.my).

Ministry of Housing and Local Government has a number of divisions and department that are closely related to the housing industry as below:

National Landscape Department

Solid Waste Management Corporation and Public Cleansing

Town and Country Department

Fire and Rescue Department

Local Government

National Housing Department

Solid Waste Management Department

Training Institute of the Ministry of Housing and Local Government.

The main role of KPKT is to ensure the development of housing industry is in clean and maintained to ensure the interest of house buyers. The licensing and advisory services in KPKT are entrusted to manage issuance of licenses, advertising permits and sales to developers. Developer who built a house more than 4 units to sell is required to obtain licenses, advertising permits and sales from KPKT. Only private developers are required to obtain the licenses, advertising permits and sales, cooperative and state cooperation are exempted from the licenses, advertising permits and sales. However, private developer also can be exemption from the licenses, advertising permits and sales, but in certain condition that was stated below:

Build less than 4 unit house.

Construct more than 4 unit house, but not making any sales.

Construct the houses but sold after a certificate of fitness (CFO) is full.

To ensure the guaranteed of buyers interest, all housing developer is compulsory to open an account in bank or financial institution specifically for each housing project. The account is to ensure that the housing developers use the housing buyer’s money in appropriate manner. Under the Housing Developers (Housing Development Account) Regulations 1991 all the money collected from purchasers and all loan obtain by the developer from bank or financial institution must be put into this account. All withdrawals from this account must be comply with the objectives set out in regulation 7 in Housing Developer (Housing Development Account) Regulations 1991 and controlled by the bank or financial institution and a certificate from registered architect or engineer who is responsible for that housing project.

The monitoring and Enforcement department of KPKT will monitor the project and enforce the law. Enforcement officer will visit the construction site to ensure that the progressing of the project follows the schedule. Because of too many housing projects and the small number of enforcement officer, surveillance is done at random and selectively.

2.4.2 National Housing Development (JPN)

National housing development also plays a role in the housing industry in develop a progressive and integrated community. JPN has high commitment in assisting the state government to provide the affordable and comfortable house through the planning, provision, and implementation of low-cost public housing such as integrated public housing program (PPR). The functions of JPN are:

Providing the basis of planning and policy related to the development of housing construction to help KPKT draft the policy, strategies and housing development plans for the country.

Carry out research on building technology, construction and design with local universities as well as undertaking socio-economic studies and the effectiveness of the housing projects of public and private sectors.

Help government and private developer in planning and coordination of their housing projects and the building.

Provide technical consultancy service such as land surveying, architectural, civil and structural engineering, mechanical engineering, contract management, management in the public housing project.

Providing loans to those who are not able to get loans to build or buy a house.

2.4.3 Housing Developer

Public developer is consisting of government agency or the corporations that control by the state or federal government. Their responsibility is to implement policies, guideline and national housing policy to protect the welfare of the poor people. All of the activities that undertaken by the government agency or corporations are not subject to the Housing Developer (control and licensing) Act 1996 and its regulations as bound by their respective government. To achieve the national housing policy, government has planned a number of housing programs like the following below in order to meet the demand of low-income group.

Integrated public housing program

Housing Lon Scheme

Housing under Land and Regional Development Agencies

Economic Housing Development Agency

Government Quarters

For private developers companies, if they want to develop a housing project they should get the “housing licenses” from KPKT as stated in section 5 of the Housing Developers (Control and Licensing) act 1996. Private sector involvement is important in order to achieve the policy objective because without the private sector, government is not able to provide housing to meet community needs. In the private sector, the program implemented are diverse and in demand from time to time. The housing development by private sector involved various categories and type of housing especially a medium and high price. Housing program can be categorized as follows:

Private Licensed Housing Developers

Special Low cost Housing Program (PKPKR)

Individual and Group Housing

2.4.4 The Contractor

In a housing scheme, the contractor is the second most important after a housing developer because they would involve themselves directly in the construction process and implementation of the project. If contractor have problem, so indirectly it also bring the problem to the developer and thus affect the housing industry. This is because the Housing Developers (Control and Licensing) act 1996 and regulations stipulated that the licensed developer need to complete the construction project within 2 years and if cannot be completed, developer must apply to extend the period of the development by giving the specific reasons.

When developers get an approval for planning permission, they will appoint certain contractors to begin work on construction site. Normally the developer will appoint a main contractor who has a good record and demonstrated their ability to implement the project. After that, the main contractor will appoint contractors to carry out minor works in accordance with their respective areas of expertise. For the certain big developer company they not need to appoint a contractor to perform the construction work because they have their own contractors and expert team.

The contractors involved in the construction industry need to get a license from the Construction Industry Development Board Malaysia or CIBD according to certain procedures. They will be given specific training in their respective field so that the quality of the construction industry can be enhanced from time to time. Contractors who wish to commence operations need to be registered in the Construction Service Centre (PKK), according to the ability of the Ministry of Entrepreneur Development and their respective classes.

2.4.5 Professionals

In housing scheme, developers is the first one who plan and identify the location that housing project want to be carried out. From the beginning of the implementation process until complete, developer need a expertise from various of field such as Real Estate Valuer, Architect, Engineers, Quantity Surveyors, Land Surveyor, financial institution and lawyer to provide all the conditions required by the government department.

Developer needs the Property Valuers expertise to ensure that the proposed site is suitable to be developed. The valuers will examine factors such as the value of surrounding real estate market around, the distance from the city center to the site, the facilities in the surrounding, the ability and taste the local population, the types and the prices of house that suitable to develop in that site, so report can be prepared to the developer. If the Feasibility study report show that the site is potentially to be developed, the developer will get the site either by the way of purchasing the land or through Land Acquisition Act 1960 (Act 486).

When the developer gets the land, he will appoint consultant to undertake the project. For a large development company, they usually have their own consultant and set it up as subsidiary. At this stage, consultant should prepare a site plan, layout plan, and drainage to the local authority for approval.

If the land is developed to be bound by any condition or restriction of interest and need to apply for subdivision, partition, or amalgamation so the land surveyor will play a role in these process until the approval from the State Authority (PBN).

Architect and Engineers play a role in providing design plans and building involved in the project implementation stage. Architect need to design the type of housing that will be developed based on the taste of buyers and accordance with current developments. According to Razali Agus, designing a house is important factor to attract house purchasers.

Before the construction process begins, engineers need to require the quantity surveyor to identify the materials needed and the cost required in providing these materials. Engineer is responsible to ensuring that all construction work is follows the Building plan prepared by the architect and follow the development schedule.

While for the lawyer, they involved in Sale and Purchase Agreement (SPA) of the Housing Developers (Control and Licensing) Act 1966 requires the attorney to provide the letter of the agreement. He lawyer also responsible for ensuring that all content is understood by the buyer before signing the SPA.

The role of financial institutions is financing the activities of housing development. The developer must obtain loan from financial institutions to finance the cost of housing project undertaken. Money that borrowed from financial institutions to the developer and the money paid by the purchaser should be put in housing development account and controlled by the institution.

2.4.6 House Purchaser

House purchaser is the most important group in housing industry because the success of failure the industry will determine by them, whether in term of financial capability, taste, and desire to own a house. The main factor influencing the decision of the house buyers is the ability to buy a house.

2.5 GOVERNMENT HOUSING LOAN

2.5.1 Basic Condition for Government Housing Loan

The basic condition for government housing loan is:

Government employees with fixed position

Malaysian

Application form submitted 6 month before retirement or termination of service

Have served at least 1 year

The position have been confirm

Not a bankrupt person or a debtor person or not capable or being disciplinary action

2.5.2 Qualification Rate of Housing Loan

Qualification rate of the loan is applied for the judges, the civil officer and members of general forces in Malaysia. The eligible amount of loan is as follow table 2.1:

NUM

MONTHLY WAGE

LOAN ELIGIBLITY

1.

RM 3500 and above

RM 300,000

2.

RM 3000 to RM 3499

RM 250,000

3.

RM 2500 to RM 2999

RM 220,000

4.

RM 2000 to RM 2499

RM 200,000

5.

RM 1500 to RM 1999

RM 160,000

6.

RM 1200 to RM 1499

RM 130,000

7.

RM 1000 to RM 1199

RM 100,000

8.

RM 800 to RM 999

RM 80,000

9.

RM 600 to RM 799

RM 60,000

10.

RM 599 and below

RM 40,000

Table 2.1: Wages and Eligibility Amount of Loan

(Sources: http://www.treasury.gov.my)

2.6 FACTORS OF SURPLUS SUPPLY IN HOUSING INDUSTRY

The factors that affect oversupply of housing is:

2.6.1 The Weak of Purchasers’ Income Growth

According to the Malaysia Sixth and Eighth Plan, the weak of the purchaser income growth is the major factor lead to oversupply in housing sector.

2.6.2 Difficulty in Getting a Loan

Malaysia sixth Plan also stated that difficulty in getting the government loan is also the factor of housing oversupply. The special loan scheme that introduced by Bank Negara Malaysia in 1982 and new condition imposed by the housing loan scheme reduced the demand for house.

2.6.3 Higher Interest Rate

Higher interest rate is also a factor why the surplus in housing supplies.

2.6.4 Higher House Price

Higher house prices are also among one of the factors that cause oversupply. Housing prices offered by the developer has reduced the high demand for housing units since most of them are not able to buy the house.

2.6.5 Location

Location is also a factor in the oversupply of housing. If a house is locate far from the city center, from work place and from the public facilities is the factor why the purchaser not interested in that house.

2.6.6 Design

Usually the design of the house that offers by the developer is simple and the spaces are limited.

2.7 CONCLUSION

From the discussion of chapter 2, we can understand in general about the housing industry in Malaysia. In Malaysia, housing industry not just only run by the government but, also run by private parties. The government is also responsible to outlining and reviewing housing policies for the formulation of more comprehensive national housing policy. This policy is necessary to meet a proposed project to be implemented in the Malaysia Eighth Plan.

Many people are involved in order to stabilize the housing industry in Malaysia. They play a vital role in helping the government to increase the housing industry. With the cooperation of all sectors or parties, the Malaysia housing industry sectors is expected to be more advanced and competitive in providing housing to meet requirement of the government and people, especially in Kelantan.