Framework for financial hardship indebtedness management in abandoned housing projects in Malaysia

Abstract

Purpose This paper aims to examine the existing practices and pertinent issues affecting Islamic banks and their customers in abandoned housing projects (AHPs) to ensure compliance with Sharīʿah and statutory requirements. Design/methodology/approach This study employs the qualitative research method using the inductive approach to analyze both primary and secondary data and sources. Data collection involved a series of semi-structured interviews with five volunteering Islamic banks and a representative of Abandoned Property Owners Association Malaysia (Victims). Statutory acts, regulatory policies, guidelines, directives and standards were also analyzed. Findings The result indicates developer’s default, underlying contracts, regulatory arbitrage and bureaucracy, attitudinal disposition of customers and sell-then-build approach as major factors of AHP’s conundrum. Practical implications This study has suggested both short- and long-term solutions based on the principles of justice, public interests and removal of hardship to resolve and effectively manage financial hardship indebtedness arising from housing abandonment. Further, part of the proposed solutions would also reshape housing development policies and home financing transactions. Originality/value The quest for this research demonstrated Islamic banking industry’s initiatives to find lasting solutions to perennial issues of AHPs.

Understanding Abandoned Housing Projects in Malaysia and the Protection for Home Buyers

“…According to Sufian and Sapian (2009) the STB system has caused unbearable damages to the home buyers whenever the developers abandoned the housing projects. This is also supported by Khalid (2010) and Mikail (2018), whereby the authors mentioned that the STB system is accounted for abandoned housing projects occurrence in Malaysia. Md.…”

“…Dahlan (2011b) also asserted that the current STB system has many weaknesses as it positioned the home buyers at stake by having to pay 10% of deposit of the full purchase price with the balance, 90% is paid progressively by the financing applied and approved for the home buyers. STB system by referring to the name applies, is intended to enable more houses to be built at a quick rate and lower price (Hoe, 2013;Mikail et al, 2018). However, this system is a threat to the home buyers as they are exposed to the risk of the housing projects being left abandoned accompanied with debt owed to the financier.…”

Creative Economic Development of Pesantren

“…Empowering information technology has currently been a necessity within all Islamic boarding schools, both large-scale boarding schools and small-scale one in order to have competitive advantages in this modern era (Alhifni et al, 2017). Fasa (2014) have examined the development of business units in Pondok Pesantren Darussalam Gontor Ponorogo East Java and foundsuch characteristics in the management of the unit asa boarding school value-based planning, cadre-based organization, transformative collective leadership, total quality control based on centralized financial (Mikail, Kasri, Elatrash, & Adewale, 2018). This latter characteristic requires modern technology where centralization of financial management will be easier if performed in an integrated manner under the assistance of computer networks.…”

Laws of Collateral in Today's World in Islamic Perspective

“…It is appropriate to mention that deferred sale or lending money contract is contingent with the condition that this contract must be accompanied with rahn and debtor sells the asset, the creditor, in this regard, can either accept or decline (Saleh & Salsabila, 2018). Any one of both parties becomes insane, frenzy, dies or compelled due to stupidity prior to the possession of rahn, there are difference of opinion among the jurists (Mikail, Kasri, Elatrash, & Adewale, 2018).…”

“…As a result, if these circumstances occur from the side of debtor, and there is a benefit in execution of sale contract, the contract will be executed or else the contract would be declined (Mikail, Kasri, Elatrash, & Adewale, 2018). On the other hand, if these are form creditor's side, his guardian will be in place of him with the consent of debtor but without his consent, the debtor will not be compelled but creditor has both rights accept as well as decline provided that rahn contract would be obligatory (al-Shāfi'ī, 1990;Al-Sharbini & al-Khatib, 1995;Qudamah, 1996); Al-Bahwti, n.d.; Al-Bahuti, n.d.).…”