Unfinished Housing Projects in Malaysia: A Growing Crisis Demanding Legal and Policy Reforms


In the backdrop of Malaysia’s flourishing urban landscapes, a darker narrative unfolds – that of unfinished housing projects commonly known as “sick projects.” These ventures, plagued by various issues, inflict hardship on all stakeholders, leaving buyers without homes and financial losses, contractors unpaid, and the construction industry struggling to contribute to economic growth.

The scale of this concern is evident, with a total of 734 projects under scrutiny, including 141 delayed, 481 ailing, and 112 abandoned as of April.

Buyers aren’t the sole victims; subcontractors and suppliers also bear the brunt, facing unpaid invoices, operational disruptions, and revenue losses.


For developers, the consequences extend beyond financial losses, tarnishing their reputation and affecting future collaborations and investor trust, leading to a slowdown in real estate investments and the economy’s growth.

Existing legal remedies offer some relief. Developers can apply for extensions of time (EOT) under Section 12 of the Housing Development Act. Likewise, buyers can seek liquidated ascertained damages (LAD) for project delays.

However, the issue persists, prompting the need for more comprehensive solutions.

Recommendations for Reforming Malaysia’s Housing Sector:

  1. Strengthen State Planning Regulations: Implement stricter guidelines to minimize construction risks and improve project attractiveness.
  2. Evaluate Developer Capacity: Ensure developers possess the competence and reliability needed for responsible development.
  3. Performance-Based Financing: Tie fund disbursement to adherence to project timelines and quality standards, incentivizing punctual project completion.
  4. Mandate Escrow Accounts or Performance Bonds: Protect homebuyers’ funds through secure accounts managed by neutral third parties, disbursed only when project milestones are met.
  5. Introduce a Rating System for Development Companies: Monitor developers’ performance and restrict devious directors and companies from new projects.
  6. Enforce Penalties and Liquidated Damages: Implement financial consequences for developers failing to meet contractual obligations, offering recourse to homebuyers.
  7. Enhanced Collaboration: Encourage greater cooperation among industry stakeholders, emphasizing effective project management, quality control, and risk mitigation.

The “sick housing” issue is a national threat that requires immediate attention. Legal professionals, industry players, and government bodies must collaborate to address this rising concern.

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