Govt mulls raising minimum capital for new property developers, blacklisting directors of sick and abandoned projects

• Deputy Local Government Development Minister Akmal Nasrullah Mohd Nasir said the government is currently studying to amend the Advertising Permit and Developer’s License Act (Act 118).

KUALA LUMPUR (Oct 18): The government is looking into raising the floor for paid-up capital and accumulated capital for new property developers, and to blacklist directors of sick and abandoned projects in an effort to ensure the sustainability of the housing sector.

Deputy Local Government Development Minister Akmal Nasrullah Mohd Nasir (pictured) said the government is currently studying to amend the Advertising Permit and Developer’s License Act (Act 118).

The ministry is also exploring how mortgage insurance could also cover ongoing houses under construction, he said.

Further, the government is looking at introducing options to purchase pre-sale and purchase agreements, said Akmal Nasrullah, in response to questions by Datuk Shamshulkahar Mohd Deli [BN-Jempol] on efforts to avoid abandoned projects and improve the management of the property development sector.

“This option contract will provide an exit clause for developers and homebuyers, and does not involve a high financial implication, [if] the property development cannot be continued due to failure of developer to achieve the targeted sales in a certain period.”

The option will allow early termination of the sale and purchase agreement if the project cannot be sold and there are cash flow issues, he said.

Touching on the higher minimum capital requirement, Akmal Nasrullah said the increase will ensure only companies with solid financial position and track record of completed project execution can be players in the industry.

On the blacklisting of directors in failed projects, Akmal Nasrullah said the same treatment will also be given to developers who fail to pay compounds and violate the awards of the Tribunal for Homebuyers Claims, and those who undertake property developments without license.

These parties, he said, “will not be able to apply for APDL (advertising permit and developer’s licence)”.

Further, the government is also looking at closer monitoring of property developers’ Housing Development Account — the account which keeps developer deposits when applying for licences and financing — to ensure the management of the account is in order.

“The best solution must be implemented, through engagements with financial institutions, to study improvements on the management of the accounts,” he said. 

Other efforts include to improve the Housing Integrated Management System, he added.

Questions were also asked about the government’s efforts to encourage “build and sell” approach by housing developers.

In response, Akmal Nasrullah explained that incentives are available for developers that use such an approach, including deposit reduction, fast-track of planning approvals at district council level, and considerations in the requirement to develop affordable housing units within the project scope.

Meanwhile, Akmal Nasrullalh also affirmed that the government has no plan to impose vacancy tax on empty units for now.

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