Urban Redevelopment Act not just usurping rights of legitimate owners but selling public land

• The URA does not merely entail urban redevelopment of private land, but disturbingly, also postulates the possibility of “privatisation” and “commercialisation” of public land — land gazetted and reserved by state authorities for public purposes under Section 62 of the National Land Code (Act 56 of 1965) and land owned by the Federal Land Commissioner (PTP).

Under the strategic blueprint of the Urban Renewal Implementation Guidelines (Garis Panduan Perlaksanaan Pembaharuan Semula Bandar (GPP PSB)), the proposed Urban Redevelopment Act (URA) by the Housing and Local Government Ministry (KPKT) encompasses the following framework:

*Urban regeneration
— revival and rehabilitation of “brownfields” (abandoned projects)
— revitalisation and repurpose of “greyfields” for economic benefits

*Urban conservation
— preservation and restoration of existing heritage buildings

*Urban redevelopment
— existing buildings are demolished and acquired for the purpose of redevelopment, involving change of land use with increased density

*New development
— greenfields — open spaces, urban greenbelts/green lungs, forest reserves converted to development — “privatising public land”

Doesn’t KPKT know that urban revitalisation, urban conservation and urban revival can be implemented within the existing legislative framework without the need to introduce URA?

(Read: Why need new urban redevelopment law when a list of existing laws are in place for the purpose?)

Urban revitalisation involves re-purposing and changing the usage of underutilised, outdated or obsolete “dead malls” or ”ghost boxes” to unlock their potential economic benefits and to complement the surrounding urban fabric in response to changing market demands as development progresses. The process involves minor facade facelifts and interior fit-outs with the overall structure maintained.

Urban conservation, which refers to the preservation and restoration of heritage and historical buildings, is typically a public-led initiative. Hence the purported “Urban conservation” under URA is redundant and meaningless. Under the regime of the National Heritage Act (Act 645 of 2005), not only are there restrictions imposed, but Section 38 of the Act also addresses the conservation and preservation of buildings gazetted under the heritage listing, including the acquisition for public purposes vide Land Acquisition Act (Act 486 of 1960). 

Urban revival, which is the revival of abandoned low-cost housing, is under the jurisdiction of SPNB (Syarikat Perumahan Negara Bhd). For private development schemes, there is a mechanism for private developers to undertake the revival of abandoned housing projects via the tripartite Novation cum Supplementary Agreement with the rights of the former original developer (via the liquidator, as the company has been wound up) being novated to the new “white knight” developer.

Challenges to being white knight

Nevertheless, such undertaking to revive long overdue and abandoned projects (without much prospect for revival) may not make any commercial sense at all for any profit-oriented private developers because of its inherent and unknown risks with little prospect for commercial gain. Some of the deterrent factors include continuous running liquidated damages (some could even run over 10 years) to be settled with existing buyers, properties under encumbrances (bank charges or liquidators), unknown and unforeseeable latent risks associated with structural integrity, potential leaks, and deteriorating and dilapidating conditions which are potentially costly to remedy.

There are also legal complexities involving various stakeholders’ interests — the chargee/mortgagee bank, the insolvent developer, the frustrated house buyers, the frustrated end-financier, and a whole host of creditors such as contractors, suppliers and service providers. The process may further be complicated by difficulties and problems associated with reaching consensus amongst aggrieved buyers, defaulted developers/liquidators and financiers, hefty and hidden costs and expenditures, inadequate balance of funds in the Housing Development Account, and the list goes on.

(​Read: Urban Renewal Act: Is KPKT biting more than it can chew?)

Furthermore, the development potential is restricted by the existing structure and foundation, so there is extremely limited potential to increase density for a higher gross development value (GDV) to achieve better profit margin to commensurate additional costs and higher risks involved in undertaking such projects. Naturally, profit-oriented developers will shy away from embarking on such “high-risk, low-return” abandoned projects.

In contrast, a “clean slate” approach on “new development” of undeveloped virgin land (greenfield) and “urban redevelopment” (completely new building after demolition of existing building), whose density can be increased fivefold to tenfold, can potentially unlock the value of the land to yield a higher GDV (hence profitability) with lower known risks and costs. Such “low-risk, high-return” projects will certainly be more appealing to developers.

However, the URA not only does not address the underlying causes of urban slums, but also fails to resolve the current dilemma of abandoned projects. Instead, the fundamental right of owners and community benefits for the public at large is at stake. Also, developing green lungs will put natural environment in peril.

(Read: Can Urban Redevelopment Act really solve urban slum problem?)

URA appears to be ‘privatisation’ scheme inclined towards trading public interest and property owners’ right for commercial gains benefiting only property developers.

Role and benefits of public land

Public land offers significant benefits to the people and community at large, from socio-economic to environmental aspects. Public land and public realm spaces play a pivotal role in balancing urbanisation as development progresses. A “sponge city” concept is critical with urbanisation to balance development to create sustainable, environmentally-friendly cities that are resilient to climate change and flooding.

In contrast, the URA seems to aim to convert green belts, retention ponds, parks and public open spaces for development. This will lead to heat-island effects, greenhouse gas effects and disruption to natural water cycles, causing erosions, landslides and flash floods, which continuously remain a contentious dilemma in radical and rapid urbanisation.

Selling public land — where does this leave us?

The URA does not merely entail urban redevelopment of private land, but disturbingly, also postulates the possibility of “privatisation” and “commercialisation” of public land — land gazetted and reserved by state authorities for public purposes under Section 62 of the National Land Code (Act 56 of 1965) and land owned by the Federal Land Commissioner (PTP).

Privatising public land is in essence “selling off” public land to private entities. Fundamentally, to privatise means literally to legitimise and legalise transfer of land ownership and control from public to private hands for the commercial gain of private developers at the expense of jeopardising community benefits and public interest at large.

Furthermore, not only does the URA allow for an increase in density and plot ratio, it also seems to exempt the need for full compliance of open space requirements, provision for community amenities/facilities for the public and affordable housing for social welfare. Privatising public land with high density developments without a need to comply with minimum open space and without consideration to commensurate with infrastructure planning will only lead to over-development and further intensify pre-existing urbanisation problems of traffic congestion and flooding.

Privatising public land leads to erosion and end of public realm

Under URA, public land originally intended for public purposes and community benefits at large (park, open space, retention pond, school, public utility, public amenities, community centre, fire and police station, etc) will be “privatised” for development purposes.

The availability of public open spaces, amenities and facilities to support the community will be diminishing as more public land is converted progressively into private land for development. Privatising public land postulates the possibility of allowing the private sector to exercise dominion over the special jurisdiction, hence leading to gentrification and social exclusions.

URA robs property owners’ rights

Such “privatisation scheme” will benefit developers at the expense of less advantageous owners with lower bargaining power. Under URA, instead of compensating owners who does not benefit from any profit-sharing scheme, the participating developers are given further tax reliefs (exemption or reduction in development charges, improvement service fund, conversion premium, etc) and non-tax incentives (increased in density/plot ratio, exemption from compliances for provision of open space and affordable housing, fast-lane approval process, etc).

(Read: Potential en-bloc sale under proposed Urban Renewal Act unconstitutional

Urban Redevelopment Act forum: Don’t wage war between ‘sell’ and ‘stay’ homeowners

En-bloc sale — grievances behind ‘successful’ Singapore stories)

URA is encapsulated as “urban entrepreneurialism”, leading to a “reverse Robin Hood” effect to legalise “stealing from the poor to give to the rich”, when the poorer owners are disenfranchised and deprived of inalienable rights.

In contrast, redevelopment of institutional or government buildings owned by single public owners (statutory body, local authority) can be addressed vide Public-Private Partnership scheme (Unit Kerjasama Awam Swasta — UKAS), which renders URA totally irrelevant.

This article is written jointly by Ar TPr Ng Guat Yong, Technical Advisor to the National House Buyers Association (HBA) and Datuk Chang Kim Loong, honorary secretary-general of HBA.

HBA can be contacted at: Email: [email protected]

Website: www.hba.org.my

Tel: +6012 334 5676

The views expressed are the writer’s and do not necessarily reflect EdgeProp’s.