As geopolitical tensions in the Middle East threaten to drive construction costs up by as much as 30% to 40%, concerns are mounting over the resilience of Malaysia’s housing ecosystem—particularly the risks borne by homebuyers under the current “sell-then-build” model.
According to Khazanah Research Institute’s Muhammad Nazhan Kamaruzuki who wrote about the concerns on housing prices and protecting buyers, said that while rising material costs are often framed as a challenge for developers and contractors, a growing body of analysis suggests that the greatest burden ultimately falls on purchasers, especially those who have committed to homes still under construction
A System That Transfers Risk to Buyers
Malaysia’s prevailing housing model allows developers to sell residential units before construction is completed, using buyers’ payments as capital to fund the project. While this approach facilitates project financing, it also shifts significant commercial risks away from developers and contractors onto individual buyers.
Kamaruzuki added that in the event of cost escalations—exacerbated by global instability—contractors may slow down work or abandon projects altogether. This can lead to prolonged delays, deteriorating build quality, or worst-case scenarios where developments are classified as abandoned.
For buyers, the consequences are severe. Many continue servicing housing loans for properties that remain incomplete, with limited recourse or protection.
Legal Gaps Leave Buyers Exposed
He argued that existing legal frameworks, including the Housing Development (Control and Licensing) Act (Act 118), do not provide sufficient safeguards for buyers when projects face delays or fail altogether.
Notably absent are provisions similar to “lemon laws,” which would allow buyers to exit agreements under clearly defined circumstances. The lack of such mechanisms leaves buyers locked into contracts, even when projects become financially or structurally unviable.
Compounding the issue is the structure of housing loans. Under the current system, buyers typically secure end-financing—meaning they begin repayment regardless of construction progress. These funds are then channelled into project development, effectively making buyers indirect financiers without the protections afforded to institutional investors.
Even the recently enacted Consumer Credit Act 2025, which came into force in March 2026, does not extend protections to housing loans, highlighting a regulatory gap in consumer safeguards.
Real-World Impact: The Cost of Delays
The risks are not merely theoretical. The case of Residensi Hektar Gombak underscores the human and financial toll of systemic weaknesses. Despite achieving full sales of 2,400 units, the project has been delayed by over seven years, leaving buyers in limbo while continuing to service their loans.
Government intervention has also proven costly. Malaysia reportedly spends around RM33 million annually to revive abandoned housing projects, with RM125 million injected into the Gombak project alone—funds that could otherwise be allocated to public infrastructure or social development.
Structural Reform Needed
The KRI writer warns that the vulnerabilities of the current system could become more pronounced amid global economic uncertainty. The construction sector’s sensitivity to geopolitical developments—particularly fluctuations in energy and raw material costs—poses ongoing risks to project viability.
Although Malaysia has expressed intentions to transition towards a “build-then-sell” model by 2030 under its long-term development plans, the interim period leaves buyers exposed.
Policy Interventions on the Table
To address these gaps, several policy measures have been proposed, including:
- Temporary moratoriums on housing loan repayments until project completion
- Automatic termination clauses for severely delayed or abandoned projects
- Stronger contractual protections within sale and purchase agreements
- Revised financing structures that reduce reliance on buyer-funded development
Such interventions, proponents argue, would not only protect consumers but also restore confidence in the housing market.
Balancing Growth with Protection
While the government cannot control external geopolitical forces, it retains the ability to strengthen domestic frameworks. Ensuring a more equitable housing system—one that balances development incentives with consumer protection—will be critical as Malaysia navigates an increasingly volatile global environment.
Until structural reforms are implemented, the burden of uncertainty will continue to fall disproportionately on homebuyers—many of whom lack the financial resilience to absorb such risks.
