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Homebuyers take on financial risk when purchasing homes that are unfinished or have yet to be built. Potential buyers of properties that are still under construction, face the possibility of a developer suddenly abandoning the project once payment from buyers have already been made.

When properties are abandoned or sold by unscrupulous developers, any money paid is difficult, if not impossible, to recoup. But just how likely are property projects to be abandoned in Malaysia? Well, a research revealed that in 2014 alone, there were a total of 68 abandoned housing developments in Peninsula Malaysia, that affected 17,468 buyers.

As such, there is definitely a need for buyers to be protected when purchasing to-be-completed properties. The Housing Development Act (HDA) is one way to provide some security for buyers.

So What Exactly Is The Housing Development Act?

In a basic sense, the Housing Development Act (HDA), protects buyers of residential properties that are under construction. Under the terms of the HDA, the advertising, permits, developer licences, the Sale and Purchase Agreement (SPA), as well as the trusting of monies paid to the developers (Control and Licensing) are regulated.

The act does not extend to cover homes that are marketed as ‘build-then-sell’ (BTS), where the developer only sells the property once it is fully completed, taking no prior payment. These homes make for a less risky purchase since the property is already finished (i.e. has obtained its Certificate of Completion and Compliance).

Currently, very few developers practice the BTS mode. However, prominent developer, SP Setia, offers BTS properties where the buyer only has to pay 10% upon signing the SPA, and the remaining 90% when the property is completed. These types of BTS properties are typically covered by the HDA (Schedules I and J) as well.

The government proposed a similar concept (BTS 10:90) to be made mandatory in 2015, but it has yet to come into full effect and its current status is apparently uncertain.

What about Commercial Properties?

Fully commercial properties built on commercial land (titles) won’t enjoy the protection of the HDA. On the other hand, buyers of partially commercial properties (e.g. some SOHOs and serviced residences) may still be covered by the act.

Moreover, in terms of utility tariffs and other payments, if a property built on commercial land is protected by the HDA, you might be able to apply for a conversion to (cheaper) residential rates.

Bonus Tip: How to know if your property is covered by the HDA? Look for these wordings on the first page of your SPA: “HOUSING DEVELOPMENT (CONTROL AND LICENSING) ACT 1966” & “HOUSING DEVELOPMENT (CONTROL AND LICENSING) REGULATIONS 1989”.

How Does The HDA Protect Buyers?

There are several parts of this act that work to shield the buyer from the effects of developers who might take off and leave them in the lurch.

Here are three main ways the HDA safeguards the buyers’ interests:

1. Mandatory Supply of Important Information

To make an informed decision when buying a new home, you’ll first need the facts and figures. The HDA makes it a must (where applicable) for developers to clearly communicate accurate property details. This includes, but is not limited to, the expected date of completion, the minimum and maximum selling price of the property, as well as the developer’s licences.

This information is especially crucial during the advertising phase of a project. Because of the act, the developers have a responsibility to deliver as promised. When advertising, a developer will need to give a precise description of the property being built, for instance, the number of carparks allotted, and the property size.

2. Holding Funds in A Special Account

This represents a major financial protection for buyers as any money paid to the developer by buyers will need to be held in a trust called the Housing Development Account.

The money cannot be withdrawn, with exception to certain clauses where it is allowed. For instance, they may withdraw to pay property taxes (quit rent and assessment tax), stamp duty as well as insurance premiums and architect fees.

Placing payments in a trust account can help reduce the incidence of unscrupulous developers making off with the buyers’ funds without completing the property. There’s also more accountability and transparency when it comes to utilising the purchasers’ payments. In fact, the Controller may freeze the account if they believe that the developer is acting in a manner that is “detrimental” to purchasers (section 7c of the 2007 amendment).

3. Fair Sale and Purchase Agreement

The HDA requires that developers adapt the terms of a scheduled SPA in order to protect the buyer from potentially lopsided agreements that favour the developer.

The contracts are separated by title; properties like apartments and condos that are under strata titles will follow Schedule H whereas residences under individual titles will be adapted from Schedule G.

A notable term in both Schedule H and G that provides more protection to buyers states that developers are liable for shoddy workmanship and material defects. In addition, the schedule also dictates the maximum completion time allowed, where developers will need to pay the buyer a late delivery interest, if exceeding.

However, the Housing Buyers Association had received complaints last year that related governing ministries had extended the delivery time frame, and buyers weren’t allowed to collect compensation. Thus, it’s important to note that while the HDA protects buyers to an extent, it isn’t perfect.

Read more about SPA here.

A Little Good News for HDA Properties

As of March 15, 2017, the Solicitors’ Remuneration Amended Order 2017, increased the allowable legal fee that lawyers can charge for SPAs on land and property purchases. HDA properties however, will be charged a lower legal fee, which is estimated to amount to a rebate of 25% to 35% !

To put simply, the HDA is there to protect your interest as a buyer. So if you’re looking to snap up a unit of a newly-launched development that promises completion in 2020, be sure to do your due diligence and find out whether the property is covered under the HDA before handing over your hard-earned money!

Do you think the Housing Development Act provides ample protection for home buyers? Share your thoughts with us in the comments below!

(Written by: Desiree Nair, 20th April 2017)


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I don't really get what you mean. You are subsales owners or tenant for many years???

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(Pos ini telah dikeluarkan oleh pengarang)

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SRAO 2017 applies to sub sales as well.

For investment point of view, it's also advisable to look into sub sales at this juncture. It's cheaper psf and larger space unlike the new development of 250sf ?? pigeon hole cum with hefty monthly service charges surprises you (after the formation of Management Committee.)

Most matured investment properties are located close to matured infrastructures. These ready move in products are at some bargains with reasonable returns unlike the new GRR schemes (cost incurred in purchase - be wary of those schemes), having not completed soon on time and when not met your signed SPA be at thy mercy after which waiting on ministerial decision and toothless HDA....

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@admin_ps thanks for sharing