Housing development industry in Malaysia

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Housing is a basic human need that not only serves as a shelter, but also is a simultaneous source of luxury, investment, privacy, and comfort. In Malaysia, the housing sector is an indispensable indicator of economic empowerment because the meeting of housing needs for all people has long been an objective of national policy 1. Housing is an important wealth constituent  2 that affects the welfare of all people either directly or indirectly  3 in the form of improved living environments. Moreover, the housing sector significantly affects the macroeconomy of Malaysia: in 1996, it contributed 4.5% to the growth domestic product  4 and acted as a tool to ‘pump prime’ the economy following the Asian financial crisis from 1997 to 1998 5.

Residences cannot be developed without housing developers 6. According to Jaafar et al. 7, housing development is the provision of money to build residential estates under stipulated rules and regulations. Such development is a localized 8, unique, and high-risk industry given the imposition of regulations  9 that may inevitably affect the construction process. To start a housing development business, entrepreneurs should have a large cash capital of no less than RM 250,000 10. Therefore, such entrepreneurs must have a disposition for risk-taking. By contrast, Abdul-Aziz et al.  11 claim that housing developers are risk-averse and that they maximize profits without thinking overly about risks and challenges.

Jaafar et al. 12,  13 also define housing developers as the chief coordinators that construct residential dwellings for sale and profit. Housing developers convert on-paper ideas into housing products  14 as project initiators 15. In Malaysia, housing developers must obtain a license from the Ministry of Housing and Local Government (MHLG) 16, and they are encouraged to register as members of the Real Estate and Housing Developers’ Association Malaysia (REHDA) 17. Khalid  18 has also defined the term ‘private housing developers’ as businesses/entrepreneurs who provide housing units for sale. These businesses/entrepreneurs hold both an MHLG license and a membership in REHDA. However, Jaafar and Wan-Daud  19 contend that those who have developed four or fewer housing units, or who have sold four or fewer lots of land, cannot be considered housing developers because they deviate from the Housing Development Act (Control and Licensing) established in 1966. Therefore, they are known as micro-housing developers in the current study. With regard to size (in terms of number of houses), small-scale developers have developed 5–49 houses; medium-scale developers have built 50 –200 housing units; and large-scale developers have erected more than 200 units for each project.

Both the public and private sectors provide housing in Malaysia. Since the declaration of the country’s independence, the public sector has assumed the role of providing housing for people. The housing projects constructed by this sector are normally funded by the government, and these funds are allocated from the national budget 20. Nonetheless, Jaafar et al.  21 note that private housing developers are also key suppliers of new housing in Malaysia. Thus, they have considerable influence on the industry. Their housing schemes are normally self-financed, deposited through would-be buyers, or obtained from the financial market 22. In fact, the private sector has provided houses more effectively than the public sector under the National Housing Policy  23 given the economic conditions that allow the private sector to secure high returns in the industry 24.

The housing development sector in Malaysia has transformed significantly since the country gained its independence in 1957 25. In the Second Malaysia Plan (from 1971 to 1975), the private sector increased its influence when the government sought the cooperation of private developers in the provision of low-cost houses. As per this plan, at least 30% of the houses in each private housing project must be low cost. The private sector has exceeded this set target by providing a surplus of 41%, 29.4%, and 116% of houses over the past three consecutive Malaysia Plan periods (1991–1995, 1996–2000, and 2000–2005, respectively). Table 11.1 shows the actual housing provision target for the period of 2006–2010 in Malaysia. In the Ninth Malaysia Plan, the private sector is required to construct 80,400 low-cost housing units, 183,600 medium-cost units, and 199,095 high-cost units. Unfortunately, the government has not documented the statistics for the targets in the Tenth Malaysia Plan (2011–2015) and for the housing erected by the public and private sectors.