Oh, what a year!

For the Malaysian property and building sector, its struggle with an expanding property overhang over recent years took a double turn with the swift and devastating Covid-19 pandemic onslaught.

While the crisis did slow new supply growth somewhat, save for the good response to a very small handful of new launches in the year, the pullback on demand is agonising developers and other industry stakeholders.

Just as the market is starting to adapt to the realities of the new normal, the current third and more forceful wave of the pandemic is wreaking havoc beyond the mere challenge of sales.

With just about a week to the year’s end, already thousands of workers in more than 20 construction sites and counting in the Klang Valley have been found to be Covid-19 positive upon screening.

The inevitable disruption to project completion and immediate cost impact on the affected developers and contractors do not vanish with the reopening of the sites.

The cost of screening, quarantine, disinfection, sanitisation and social distancing practice will no doubt add up to a substantial sum, the amount of which cannot be predetermined; as with when and will Covid-19 go away.

A construction site is nothing like a retail shop in a mall, a supermarket or a food outlet.

In a shop or a supermarket, the social distancing practice requires patrons to first queue up, scan the Sejahtera code, take a temperature reading and sanitise hands. To avoid overcrowding, depending on the floor size, patrons may need to wait to be let in.

At a food outlet, the operator’s pain point is in the inability to pack in and turn around as many patrons as possible. Patrons can choose to either wait for a table or walk away.

Over at construction sites and away from the general public’s eyes, social distancing gets a bit more complex because of the very nature of the work demanded.

The SOPs (standard operating procedures) instituted extend to the logistics of transportation for the workers to and from the site; work breaks and housing facilities. It gets more complicated and costly each time any positive Covid-19 case is detected onsite.

It is fair to then assume a project will take longer to be completed and at higher costs. Who will pay for all these? The developer, contractor or buyer?

Urgent need to review and extend application of Covid-19 Act

Addressing this is the newly-gazetted Temporary Measures for Reducing the Impact of Coronavirus Diseases 2019 (Covid-19) Act, but industry players say it was enacted too late (on Oct 23, 2020) and it is not addressing issues in the whole supply chain.

Real Estate & Housing Developers’ Association Malaysia (REHDA) has pointed out that while developers are entitled for some relief of liquidated ascertained damages (LAD), they face an extended defect liability period (DLP) with no provision to have a similar extension on DLP on contractors.

As the Act now stands, REHDA president Datuk Soam Heng Choon has noted, it requires developers and purchasers to apply for an extension from the Minister of Housing and Local Government to rely on such reliefs. Yet, he has said, the minister appears to be empowered to only grant an extension till Dec 31, 2020.

Given the rising number of Covid-19 cases, an extension of the relief is urgently needed. It is also timely to review provisions of the Act.

For instance, the Act states that any parties who are unable to fulfil their contractual obligations due to measures taken under the Prevention and Control of Infectious Diseases Act 1988 to curb the spread of Covid-19, the disputes arising from it may be settled through mediation. 

Is mediation the best way forward to prevent disputes from dragging? Or the formation of a tribunal or a special court for the purpose? 

In the meantime, REHDA has resorted to calling on all the contracting parties involved to use their “common sense” and come up with a commercial decision to settle their issues because losses due to Covid-19 and the lockdown “is no fault of the parties”.

There is no doubt that we urgently need a clear, precise and sensible guide to tackle anticipated disputes arising from the impact of the pandemic.

And, have you heard yet? The coronavirus has landed in Antarctica, the last continent previously free from Covid-19!

Reuters, quoting Chile military earlier this week, said health and army officials scrambled to clear out and quarantine staff from a remote research station surrounded by ocean and icebergs.

At least 36 people — 26 army personnel and 10 civilian contractors conducting maintenance at the Bernardo O’Higgins base - have been infected. The permanently staffed research station, operated by Chile’s army, lies near the tip of a peninsula in northernmost Antarctica, overlooking a bay often dotted with icebergs.

So, what would 2021 look like? After what we have been taught in 2020, who could declare with conviction whether it is going to be a better or worse year ahead.

We could choose to remain positive. Or negative. I am all for the former.

The Big Idea: Unlearn and re-learn. Re-focus. Re-strategise.

Here’s to a healthy, joyous and impactful 2021!

Latest property overhang

As at third quarter 2020, there are a total of 65,552 overhang units worth RM50.17 billion in Malaysia.This is a slight increase of about 4% from the 63,063 units (worth RM46.96 billion) in the first half of 2020.

According to the latest National Property Information Centre (NAPIC) data, housing and serviced apartments make up the bulk or 84.2% of the overhang properties. These comprise a total of 30,926 housing units worth RM19.99 billion and 24,267 units of serviced apartments worth RM21.33 billion.

Overhang units are defined as units that have received their Certificate of Completion and Compliance but have remained unsold for more than nine months after launch.

This story first appeared in the EdgeProp.my e-Pub on Dec 25, 2020. You can access back issues here.

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