By Joseph Wong

The stories of home buyers facing penalties due to the inefficiencies of government and state agencies or the unscrupulous actions of developers and their agents have become all too familiar. These tales circulate through news reports, viral social media posts, conversations with family and friends or even the whispers at coffee shops. It is a stark reminder of how vulnerable the system can be when it comes to protecting home buyers.

Purchasing a home is already a daunting and financially draining endeavour for many Malaysians. It often requires a significant portion of their hard-earned savings and for some, it may be the only home they can afford in their lifetime. The recent bumiputera housing quota fiasco serves as a glaring example of the pitfalls buyers can encounter in this process.

In such an environment, potential home buyers find themselves at a crossroads, hesitating to sign the Sales and Purchase Agreement (SPA) due to the increasing number of housing issues plaguing Malaysia. The SPA, once a document representing the promise of a new beginning and a secure future, has now become a symbol of uncertainty and apprehension for many.

It takes an immense amount of courage to put one’s signature on the SPA these days. The prospect of homeownership, once seen as a dream come true, is now fraught with uncertainty and apprehension. Why is this happening? Is this a reason why Malaysians, who have long aspired to own their homes, are now considering other alternatives such as renting?

The answer lies in the advantages that renting has come to offer in comparison to the complexities of owning a home. Renters enjoy the flexibility to switch to another unit in a different neighbourhood when their tenancy agreement ends. They have the freedom to explore new places, change neighbourhoods and adapt to their evolving lifestyle without being tied down to a property. This kind of flexibility has become increasingly appealing in a fast-paced world where change is constant.

However, for home buyers, the story takes a different turn. Once the ink dries on the SPA, they are bound to the property they have purchased, regardless of any changes in their circumstances.

What was once a symbol of financial security has become a potential burden, locking buyers into long-term financial commitments. This raises essential questions about the state of the housing market and the policies in place to protect home buyers. Should purchasing a home come with such daunting risks and uncertainties? How can these challenges be addressed to ensure that the dream of homeownership remains attainable without causing undue stress to Malaysians?

Questions such as these re-emerged after the recent news report, titled Homeowners unknowingly sold bumiputera lots, slapped with RM13m penalty fees. This is not the first time it has happened. In fact, it had been previously addressed last year during the Selangor State Assembly session held in March. Subang Jaya Assemblyman Michelle Ng Mei Sze had sought updates on the prevention system against the sale of bumiputera inter-alia lots.

Yet, innocent home buyers continue to face penalties for the inefficiencies of state agencies in implementing the bumiputera housing policy, as emphasised by the National House Buyers Association (HBA).

To recap, HBA honorary secretary-general Datuk Chang Kim Loong has pointed out that since land-related matters fall under the jurisdiction of individual state governments, the Selangor Housing and Property Board (LPHS) and associated agencies, such as the land office, hold the responsibility for ensuring the fair sale of bumiputera quota units.

Selangor enforces a 40% bumiputera quota for housing, along with a 7% discount for bumiputera buyers. However, the bumiputera housing policy varies from state to state, with quotas ranging from 30% to 50% and discounts ranging from 7% to 10% for bumiputera buyers.

Chang said that the quotas may only be released through a strict bumiputera release mechanism that housing developers must adhere to before the units can be sold to non-bumiputera purchasers.

The issue at hand, as reported in the Star Metro’s front-page story titled Penalty Dilemma, involves housing developers who oversold bumiputera units to non-bumiputera buyers without following the proper release mechanism process outlined in Selangor’s Bumiputera Quota Maintenance Mechanism 2.0 circular issued by LPHS.

Chang expressed concern about how a significant number of bumiputera units were sold due to lapses in monitoring and enforcement. He noted that these housing developers provided written confirmation to the affected buyers and their financiers/banks, asserting that the purchased units were not designated as bumiputera units. However, with these developers becoming insolvent, it is unjust to impose penalties on those who unknowingly purchased these units.

Chang further pointed out that the affected buyers now have to seek exemptions through private liquidators, incurring additional administrative fees that further burden them. The absence of a safety net and adequate measures to ensure compliance with bumiputera quotas by housing developers and land proprietors is a matter of concern. It is unjust to victimise innocent house buyers due to the inefficiencies of state agencies. Instead, Chang suggested that the LPHS should take legal action against the developers, potentially filing a police report and initiating an investigation, rather than passing on penalties to innocent buyers.

Possible solutions

To address such flaws in the system, LPHS and other state governments should:

1. Revise a uniform standard of procedures (SOPs) to ensure adherence to bumiputera quotas for every state. Moreover, the government and its agencies must be transparent. As it stands, every state currently has a different quota, operating system and release mechanism, if any. This confuses both the developers and buyers. A standardised policy and SOPs with a proper release mechanism will help the property market in Malaysia grow further.
2. Property developers must comply with the mandatory bumiputera quota release mechanism. However, consider loosening the mechanism to promote compliance. A long-drawn and complicated mechanism would lengthen the sales of the properties and add unnecessary costs to affordable units, adding to the financial burden of home buyers.
3. Implement a transparent system for reporting on the periodic sales of approved units. This will encourage more potential home buyers to make the purchase rather than pulling out after a long wait for the unit to be released.
4. Require the Board of Directors (BOD) of developers to sign a Statutory Declaration. This top-down approach would ensure that companies will adhere to the regulations regarding the release and refrain them from venturing down the unscrupulous path.
5. Hold the BOD of developers jointly and severally liable for overselling bumiputera units via a Letter of Understanding.

In the interim, the involved parties in such cases should file a police report against the developers for cheating and/or fraud to initiate a criminal investigation.

To resolve the dilemma, the State Executive Council Unit (MMKN) should authorise the release of consent to all affected non-bumiputera buyers without attaching conditions.

End bumiputera units

Another perspective in this discourse involves considering the potential cessation of assigning bumiputera titles to properties entirely. Instead, a proposed alternative is to offer automatic discounts exclusively to bumiputera buyers. This approach would allow bumiputera individuals to purchase units at reduced prices while still affording them the opportunity to capitalise on potential price appreciation if they opt to sell the property to a non-bumiputera buyer after a specified period, say 10 years. By eliminating the explicit assignment of bumiputera titles, the focus shifts to a more flexible and economically sound model, fostering a system that balances equity and economic incentives for all stakeholders involved in the property market.

In the coming years, it will be crucial to address these concerns and create a housing environment that fosters both security and flexibility for home buyers. The goal is to inspire confidence in the real estate market, encouraging more Malaysians to embrace the dream of homeownership without fearing the penalties that may await them.

Meanwhile, it is imperative to acknowledge that the realm of challenges faced by home buyers extends far beyond the scope of the discussed bumiputera title concerns. The landscape is rife with a multitude of issues ranging from fraudulent loan activities to complexities related to strata-title matters. These intricacies deserve thorough exploration and analysis, warranting dedicated attention in future articles. By delving into these multifaceted challenges, we can unravel the layers of intricacies that home buyers grapple with, providing a comprehensive understanding of the diverse issues that permeate the real estate landscape. 

In the coming years, it will be crucial to address these concerns and create a housing environment that fosters both security and flexibility for home buyers. The goal is to inspire confidence in the real estate market, encouraging more Malaysians to embrace the dream of homeownership without fearing the penalties that may await them.