Prevention is better than cure: Govt unveils OTP exit clause to stop sick housing projects

KUALA LUMPUR, Aug 10 — The government aims to ensure Malaysia has no abandoned housing projects by 2030, with a new Option to Purchase (OTP) mechanism expected to give developers and buyers an earlier avenue to withdraw from projects that may no longer be viable.

Housing and Local Government Minister Nga Kor Ming said the mechanism was part of a broader housing reform agenda aimed at preventing projects from becoming sick or abandoned in the first place.

“Prevention is better than cure. That is why I have implemented housing reforms so that our mission is to ensure that by 2030, Malaysia has no more abandoned projects,” Nga said at a separate press conference following the launch of the National Housing Policy 2026-2035.

Nga said the ministry’s special task force on private-sector sick and abandoned housing projects had resolved 1,647 such projects — as of today — involving RM153 billion and nearly 200,000 homebuyers over the past three years.

Among the reforms included in this policy are the Housing Integrated Management System (HIMS), the Transforming & Empowering Data Usage in Housing (Teduh) platform, electronic sales and purchase agreements, regular audits of Housing Development Accounts, a new Housing Development Act, as well as the introduction of an OTP and Sunset Clause.

Nga said the OTP mechanism was expected to be introduced by the end of this year.

He said the mechanism could provide both developers and buyers with an avenue to withdraw from a project within a specified period under agreed terms.

“For example, we give a period of six months. If within those six months the developer feels that the project is going to fail, the developer will have the right to offer an exit,” he said.

Under the proposed mechanism, deposits paid by buyers would be returned in full under such circumstances, together with the applicable terms set out in the agreement, he said.

Buyers could also exercise their right to withdraw during the specified period if they found a more suitable property, subject to charges and other terms under the agreement.

Nga said the mechanism was intended to allow both sides to reassess their position at an earlier stage instead of allowing an unviable project to progress until it became a larger problem.

“If there is no OTP, a developer may have to continue building. Once construction has started, even if sales are not there, they have to complete the project,” he said.

He said a developer could otherwise continue construction on a large project despite weak sales, eventually running into financial difficulties and leave buyers and the government to deal with the consequences.

Nga said HIMS, Teduh, regular HDA account audits and OTP formed part of a package of reforms being actively implemented by the ministry.

“I will monitor this every month to ensure that by 2030, our country has no more abandoned projects,” he said.

He said housing needs could be assessed according to individual districts and locations, including the number and types of homes required.

The system would also take into account local income levels and property prices, allowing housing supply and prices to better reflect conditions in different areas.

Nga said developers would eventually be able to subscribe to the system and use the information when planning projects, although its use would not be mandatory.

He stressed that all new housing projects would continue to be subject to requirements for developers to obtain advertising permits and developer licences.

“The government would not simply issue developer licences and would use available information to assess whether proposed projects were appropriate for the market,” he said, adding that the approach was intended to help create a more balanced property market while reducing the risk of future oversupply.

Nga also said the government needed to balance housing affordability with the need for property values to appreciate over time.

“Property ownership is not only wealth preservation. It is also wealth creation,” he said.

He said the government did not want house prices to spike, but neither should property values remain stagnant for decades.

“What we want is a gradual increase,” he said.

On housing affordability for the M40 group, Nga said lower home ownership rates could be influenced by various factors and should not automatically be attributed to affordability alone.

He said some people, particularly younger people and graduates, may prefer to rent rather than commit to long-term bank financing.

“We respect your choice and your option,” he said.

Nga said the government would therefore provide options for those who wanted to own homes while also developing a more structured rental market.

The National Housing Policy 2026-2035, launched today, proposes the enactment of a Residential Tenancy Act to create a more transparent, secure and balanced rental market.

Nga said the government’s approach was to provide housing choices according to people’s circumstances, whether they preferred to own or rent.

The policy also includes the phased implementation of the Build-Then-Sell (BTS) system to strengthen protection for homebuyers.