By Professor Dr Ismail Omar PPERT & Aminah Md Yusof APERT
Land developers, as part of the professional property team, are responsible for the production of the built environment. In fact, land developers play a big role in ensuring how the land development project is to be completed and sellable in the market.
A slight delay means higher cost to them that affects the quality expectation of the potential buyers. Verily, the delay means the cost that the project must always be completed ‘yesterday’ instead of ‘tomorrow’.
Norman Hutchison, a property professor at Aberdeen University, Scotland asserted that land development is a game by itself which consists of many rules. One of the laws of the game in land development is the land matters itself.
As for the Ministry of Housing and Local Authority, data revealed on property glut or overhang in the market, approximately 29,000 units of luxury properties worth about RM29 billions hanging unsold in the country.
The National Property Information Center (NAPIC) has revealed that there were about 2,260 unsold condominiums in the Klang Valley as of the second quarter of 2018, of which about 500 were luxury units priced at RM1 million and above. It has been reported that a total completed unsold property value stood at RM42 billion or 55,999 units in the first quarter of 2020. The figures are alarming.
As such, not only the government that should be aware and pay attention and land developers too must realise and take steps to resolve the problems.
In the meantime, Covid-19 has infected more than 33,500,000 human lives and killed more than 1,000,000 people worldwide. In Malaysia, the pandemic has killed 136 and affected more than 12,000 cases.
Disastrously, it had dampened employment, especially in hospitality, education, manufacturing and many sectors. With the end of the moratorium, peoples’ financial ability is becoming more unstable. Media reported that about 800,000 people are losing their jobs in Malaysia by the end of September 2020.
Significantly, Covid-19 had also reduced the property transactions and prices, which generally has fallen about 15% to 25% in different sub-markets in Malaysia.
According to some property analysts, the impact was up to 65% depending on location and commercial property sub-market. As a result, buyers and tenants are having difficulties owing to the loss of income and the restriction of at least 30% of income is available for loan repayment, a condition imposed by Bank Negara Malaysia. This is known as affordable housing stress that needs immediate action from the government to respond and mitigate the impact during post-Covid-19.
Consequently, land developers are becoming more aware of the risk and uncertainty in the market. Bryan MacGregor, MacRobert Professor in Property at Aberdeen University, Scotland refers to problems and risk in the market as market or value constraints.
Unresolved land matters mean higher costs to land developers. Of course, high cost affects the level of profit margin. One of the aspects of land matters is a restriction in interests that cannot be allowed to be transferred to certain races or foreigners. In land economic terms, this restriction in interests is also known as a transaction cost.
The government has introduced numerous efforts and programmes to provide adequate, affordable housing to meet the needs of the people. One of the efforts is to identify suitable land and make it available in the market for the development of affordable housing. Those lands with restrictions in interests include Malay Reserved, Malacca Customary, Adat and Pepatih Negeri Sembilan, waqf and native land in Sabah and Sarawak.
Supply of suitable land for affordable housing in the market may be restricted by those land supply constraints that frozen the land values. The frozen land values must be investigated and ‘de-frozen’ accordingly.
In real estate, waqf (or alhabs) can be viewed as long term assets to produce and generate income for the poor and the needy known as ‘mawquf alaih’ or the beneficiaries. This means that waqf can protect and provide security in the long run in the forms of security of tenure (freehold and leasehold interests).
Waqf can also be viewed in generating security of income or the flow of returns in the form of rental and capital appreciation as ‘hedge against inflation’ in property investment. Therefore, the security of capital in landownership may strengthen the value of the investment assets of the people in the long term. In a way, waqf properties are devoted to the capital assets that produce an endless flow of revenues (manfaat) to serve its objectives of waqf for the benefit of the mankind at large until the hereafter.
Unfortunately, there are less than 12% of about 30,000 hectares designated and registered waqf land that has been improved and developed in the country. The rest is under-utilised and left idle (JAWHAR, 2013-2016). Therefore, it is timely to revisit the constraining factors of waqf land to pave the way forward to make those land available in the market for development purposes.
However, the misconception that once development is completed, the waqf land is not allowed to be sold to non-Muslim is wrong. The misunderstanding that waqf land is not supposed to be economically and commercially developed is also false and misleading. More importantly, the misconception that non-Malays and non-Muslims are not allowed to become partners in a joint development scheme on waqf land is totally unacceptable.
The report on waqf land transformation study carried Islamic scholars and published by Malaysia Waqf Foundation in 2013 explained the way to administer and develop waqf land in the country.
In Islam, the objectives of the Maqasid Shari’ah can allow for the provision of affordable homes to those in need. The maqasid includes religion, human life, family, property and human dignity which are all the basic necessaries (daruriyyah), needs (hajiah) and embellishment (tahsinyah) that form the purposes for which the waqf assets can be invested and disbursed.
The waqif (the donor) and mawquf alaih (beneficiary) may consider waqf as one of the tools for the fulfilment of the second Shari’ah objective that is hajiyat or the needs of society. The Nazir can use waqf properties in line with Shariah objectives (maqasid Shariah) even in cases where the terms and conditions of the donors are restrictive.
The development of affordable homes can still be carried out on the waqf land with a mosque constructed on the land. Such development can even be better to obtain the benefits of the waqf as the occupants of the homes will make use of the mosques for prayers and religious activities at the site.
One may presume that a waqif can equally state in his hujjah (or sighah) waqf that the land can be developed in housing and the rental of which can be used for the benefit of waqf. When a waqif is silent on purpose or has dedicated the land for the benefit of someone or something, generally, there may arise dispute on whether or not the nazir can develop housing on such land and under what conditions. It is suggested that this should be permissible as the nazir or waqf trustee has the duty towards waqf and its beneficiaries by protecting the existing waqf assets and maximising income to the beneficiaries.
Waqf is not obligatory but in Islam, it is a righteous gesture surrendering assets to be benefitted by the beneficiaries. Therefore, Muslims can play a big role in the development of affordable homes by exploring the use of waqf property. It was right that affordable homes constructed on waqf properties can be priced at affordable prices which will be affordable for the low and middle-income households to purchase these houses as there is no element of land cost in the development and the development can be developed at a much lower cost in comparison to those in the open market.
Mechanisms that can be applied by waqf managers are the property ‘lease’ can be for sale, for rent, subsidised or otherwise and, if qualified, for free. Where it is a matter of necessity (daruri), the waqf manager should provide free shelter.
People below the poverty line and with difficulty to sustain their families due to their low income may qualify for such free housing. In case a person does not have the house and is looking for a house to own it, waqf managers may provide some subsidy compare to the market if he fits within criteria that the managers have fixed for grant of subsidies and for those who can afford the conventional homes which can still be considered under the categories of the maqasid and the managers can provide housing, but not with subsidy but rather making a profit for the waqf property when can then be ploughed back to the waqf institution.
Professor Djurdjani Wardata, a researcher at the University Gadjahmada, Indonesia considers land development constraints to include expenditures that are incurred while managing the waqf properties such as time, ownership, legal, planning constraints that are necessary for undertaking any development. Whilst Professor Patsy Healey from University of Newcastle Upon Tyne, United Kingdom categorises those constraining factors on waqf lands into two categories: structure to include rules, resources and ideas whereas agency to comprise roles, motivation, strategies and actions.
Furthermore, Islamic Research and Training Institute (IRTI) had undertaken a study that indicated the supply of affordable housing to include non-availability of suitable land in cities, poor quality of infrastructure, problems with land ownership, legal matters, high transaction costs and lack of housing finance.
First, the legal and administrative frameworks refer to the lack of proper registration of waqf land deriving from inadequate administrative laws which lead to improper waqf land databases. State-of-the-art data on waqf land must be rearranged to ease the analysis of its categorisation and problems identified for improvements.
Additionally, problems in administering land tenure, rental management, planning and difficulty in controlling the charges and payments to the authority further dampened the good governance and state-of-the-art of waqf land management and administration.
Secondly, constrain financial rules in securing funds for the development of waqf land from banks and financial institutions had dampened the initiatives to develop waqf land. In addition, there are cases whereby the rental paid by tenants to the religious council is lower than the rental market due to long term rentals and non-renewable rental agreements. Furthermore, waqf properties must enjoy related tax exemption such as ratings and quit rent.
This tax exemption relieves the burdens of outgoings to the Religious Councils that are just the caretakers and trustees thereof. Partnership and joint venture schemes must be encouraged between smart partnership in helping each other undertake the development of waqf lands. Again, human resources in relations to waqf property development must be strengthened and retrained.
Thirdly, with reference to socio-political agenda, the sensitivity of the ownership and survivorship of the Malay/Muslims agenda had adversely affected the way waqf land must be viewed to enhance its highest and best use in the open market. For sure, this required training and retraining human resources for administering and managing waqf land in the country. According to a study, almost all MAINs are having a lack of experience and professionalism in waqf land management. Therefore, the Waqf Related Agencies have to come forward with an agenda of human resources transformation to professionalise staffing of waqf human capital.
Lastly, agents and agencies need to be together in administering, investing, managing, developing and maintaining waqf lands in the country. By undertaking all the efforts to improve the waqf land management, and improving the constraints, the values of waqf lands will be enhanced and the benefit (manfaat) will be for the people forever and ever.
Surely, waqf properties can be aided as a relief to the poor and needy households to purchase affordable homes. Therefore, IRCs as sole trustees of waqf lands in their fulfilment of management responsibilities have the duty of care to protect and add values to the waqf assets and to provide maximum benefits to the beneficiaries based on hujjah (or sighah) thereof.
The development of waqf land for affordable housing may be carried out using waqf liquid capital market instruments like sukuk, real estate investment trust or crowd-funding.
The completed accommodation can be rented or leased, whereby the occupant will enjoy the house, and the waqf institution and beneficiaries will benefit from the income, which can be invested further, and the ever-flowing manfaat can be redistributed to the poor and needy.
This way, waqf may pave a way forward to respond and mitigate the affordable housing stress during the impact of post-Covid-19.
As such, land developers must be able to acknowledge land matters and waqf land so that they may be able to offer hand in hand to undertake land development of affordable houses in the country. Surely. Without expertise in land development, waqf land managers are looking forward to the assistance of land developers.
Professor Dr Ismail Omar is a lecturer at Department of Real Estate Management, Faculty of Technology Management and Business, Universiti Tun Hussein Onn Malaysia and the President of Land Professionals Association of Malaysia (PERTAMA) since 2014.
Associate Professor Dr Ts Aminah Md Yusof is a member of Land Professionals Association of Malaysia (PERTAMA) and senior lecturer at the School of Engineering and a former Deputy Dean at the School of Post-Graduate Studies, Universiti Teknologi Malaysia.
*The writer has attended and presented a paper at the property seminar entitled “Land Joint, Ventures and Land Issues” organised by the Institute of Real Estate and Housing Developers Association (Rehda Institute) in Kuala Lumpur recently. The focus of the property seminar was on the land issues of waqf and Malay Reservation, compulsory purchase and compensation and land joint ventures. Despite the second wave of Covid-19, about 200 participants attended the meeting.