RM200m to compensate failed PR1MA projects

Once negotiation is complete, PR1MA expected to own more than 25 parcels from 31 cancelled projects

by AFIQ AZIZ / pic by TMR FILE

PR1MA Corp Malaysia is expected to fork out up to RM200 million to compensate contractors who were involved in 1Malaysia Housing Programme’s (PR1MA) “sick projects” that were cancelled.

A source close to the matter told The Malaysian Reserve (TMR) that over 30 PR1MA sites spearheaded by the company had been halted, higher than the 24 projects that were announced by the Ministry of Housing and Local Government (KPKT) last month.

The source said PR1MA, as a government-owned developer, is expected to carry out negotiations with the contractors on the amount of compensation, which is estimated to go up to RM200 million.

The compensation would also involve an offset of land parcels deemed not worth keeping by the agency, after all the due diligence is done.

“The negotiation on the amount of compensation is underway, after it was decided that only 63 of 94 PR1MA projects can proceed.

“Once the negotiation is complete and agreed upon, PR1MA is expected to own more than 25 parcels from the 31 projects that were cancelled,” the source told TMR.

The RM200 million would also be utilised by contractors to compensate PR1MA housing buyers, who had already signed the sales and purchase agreement.

Last month, KPKT Minister Zuraida Kamaruddin said the ministry had approved the cancellation of 24 PR1MA projects. This was to reduce the company’s debt exposure, which amounted to RM11 billion, while resuming new affordable housing projects.

Of the 24 projects, Zuraida said the government and contractors of eight projects had mutually agreed to end the contracts, which involved RM42 million in compensation. She said some of the eight projects will be redeveloped as affordable houses.

PR1MA was formed on Jan 1, 2013, under the Prime Minister’s Department with a vision to develop affordable housing for the middle-income group in key urban centres in Malaysia.

The agency had promised to provide one million homes to the middle-income group by 2020.

However, despite more than RM8 billion of government injection in the state-owned affordable housing scheme, only 16,682 units or 1.6% of the total houses were completed as of 2018.

In the same year, the Cabinet agreed to absorb PR1MA into KPKT and be streamlined under the National Housing Affordable Council.

There were allegations that some of the projects were developed at non-strategic sites which resulted in slow take-up rates.

While there were buyers still waiting for their home to be completed, contractors were also stuck in the middle as the government decided to not proceed with some of the non-viable projects, without a clear direction given in 2018.

In May 2019, Malay Chamber of Commerce Malaysia (DPMM) youth chief Mohd Ali Amin Ab Latif said after a year, many PR1MA constructions had failed to restart, with concerns mounting over the dormant projects and outstanding payments by the agency.

DPMM said on average, the developers had forked out between RM10 million and RM15 million for land acquisition to start their projects.

In an agreement with PR1MA, contractors are allowed to propose their land parcels and locations for development, with the land either to be wholly owned by the contractor or mutually owned with PR1MA.

Meanwhile, DPMM president Abdul Halim Husin urged PR1MA to reconsider to offset the land value in compensating the contractors, as many firms are struggling to survive with tight cashflow amid the current economic downturn.

“They have been waiting for two years and without cash, during this Covid-19 pandemic and Movement Control Order, they are at risk of winding up their businesses,” he told TMR.

He said most developers decided to invest in the beginning because PR1MA had guaranteed that the projects were viable.

“At that time, businesses were not so good so they parked their resources into PR1MA, but it was proven that the project had failed,” Abdul Halim added.

He said contractors are also pessimistic whether the government can pay the compensation on time due to the challenging economic environment.

PR1MA has yet to respond to questions from TMR at press time.