Mastura Jaafar Azlan Raofuddin Nuruddin Syed Putra Syed Abu Bakar Business Sustainability Model for Malaysian Housing Developers Business Sustainability Model for Malaysian Housing Developers Mastura Jaafar • Azlan Raofuddin Nuruddin Syed Putra Syed Abu Bakar Business Sustainability Model for Malaysian Housing Developers Mastura Jaafar Azlan Raofuddin Nuruddin School of Housing, Building and Planning School of Housing, Building and Planning Universiti Sains Malaysia Universiti Sains Malaysia Penang, Malaysia Penang, Malaysia Syed Putra Syed Abu Bakar School of Housing, Building and Planning Universiti Sains Malaysia Penang, Malaysia ISBN 978-981-10-5265-1 ISBN 978-981-10-5266-8 (eBook) DOI 10.1007/978-981-10-5266-8 Library of Congress Control Number: 2017945272 © Springer Nature Singapore Pte Ltd. 2018 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Printed on acid-free paper This Springer imprint is published by Springer Nature The registered company is Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore Foreword by the Vice-Chancellor of Universiti Sains Malaysia Allow me to begin by congratulating the authors involved in extending the idea of sustainability to the viability of a business model in the housing sector. Sustainability has always been the core idea at Universiti Sains Malaysia, as we formulate and implement policies and research outcomes for the betterment of all. Property development remains a booming business sector in the country. It offers the populace the availability of choices and the opportunity to become more estab- lished on a personal level. At the same time, the industry promotes growth in the skills-based job market too. However, as with any business model, the certainty in continuity is a factor that could sustain businesses in the long run, as they face the ever-growing and challenging market. Therefore, the publication of this book, with the support of a university grant, is a truly welcomed effort, as it could serve as a guide or reference to those involved in the industry. v vi Foreword by the Vice-Chancellor of Universiti Sains Malaysia I applaud this book also not only for its timeliness but for putting a ‘face’ behind the development firms, for ‘humanising’ the entity behind the realisation of the all too basic of human needs. Much maligned and abused, and deservingly so at times, this effort dismantles much of the myth of the ‘snake oil’ peddlers of properties. We are informed of anecdotes that illustrate the difficulties, obstacles and a retinue of impediments that developers have to confront. At the same time, we are treated to first-hand accounts from property players of the risks, challenges and struggles they had to endure. We are then regaled about tales of their fortitude, perseverance and sheer industry. They do all this, and more, not just for the pursuit of profit but to enable the current and future generations to have the proverbial ‘roof over their heads’. I also welcome the manner in which this subject has been treated, as it covers a fairly comprehensive range of small- to medium-sized firms right up to major public-­listed conglomerates. Interestingly still, certain core values were painstak- ingly extracted and compared, making the book an extremely useful reference point for potential developers, besides providing current ones with clear-cut examples of learning from the country’s best. While some of the issues appear mundane and obvious, they still needed to be stated unequivocally and convincingly – this effort has managed to successfully capture and convey both. Vice-Chancellor Professor Datuk Dr. Asma Ismail, FASc Universiti Sains Malaysia Preface Housing is an indispensable need for human beings. It not only reflects a certain standard of living, but its manifestation has transcended into a symbol of modernity and lifestyle. In Malaysia, the Real Estate and Housing Developers’ Association (REHDA) estimates that about 150,000 units of houses are required annually to fulfil the population demands and household growth. To accommodate the growing demand, the government of Malaysia has been encouraging the involvement of pri- vate housing developers since the 1970s. The role of private residential developers is significantly increasing and is considered a particularly important component of the industry for national economic development. Pragmatically, a housing developer is a coordinator of housing production that works through the accumulation of necessary resources and capabilities and to pro- gressively monitor the residential project until its final delivery. Within the develop- ment process, the housing developer deals with numerous land and construction-related activities such as site identification and assembly, subdivision approval, site supervision and marketing the project. In Malaysia, housing develop- ers normally comprise private developers, state-owned enterprises and cooperative societies and are involved in all categories of housing provision encompassing high-, medium- and low-cost houses as defined under the Housing Developers’ Act (Control and Licensing) 1996. To develop and sell more than four houses, residen- tial developers must obtain a licence from the Ministry of Urban Wellbeing, Housing and Local Government (MUWHLG) and are encouraged to register as members with REHDA. Basically, housing development involves a huge amount of money and entails diverse and complex processes such as land subdivision, building construction, final product delivery, advertising, sales and marketing. In today’s globally competitive environment, with twin facets of rapid technological progress and high customer expectations, companies find it harder to ‘beat’ the competition by depending only on their own capacity. For the real estate sector, notwithstanding the high capital investments, the composition of industry players is rather ‘kaleidoscopic’; those who are unable to perform will be forced to exit the industry, only to be replaced with fledglings who may lack experience but are hungry for success for which the vii viii Preface sector is well known for. Without sufficient industry knowledge, however, these new entrants will invariably be exposed to the real possibility of business failure, and the cycle is then repeated. The compelling question therefore is how new housing developers can enhance their competitive advantage when entering the real estate market and be able to sustain within the context of such a profitable but volatile industry. Simply put, housing developers gain profits from the margins derived from house selling prices and, to an extent, a sense of self-satisfaction from the sale of the prod- ucts, which oftentimes represents the single largest investment people will ever make. Developers are, by nature, commercially driven in a business fraught with risks. As such, the only real criterion they can ratchet up by themselves is sheer motivation, intrinsically the desire to become a successful entrepreneur and, in so doing, to transform their lives. Achieving competitive advantage depends on the ability of housing developers to mobilise and exploit the linkages of the numerous resources within their business environment. Each step in housing development necessitates a close and mutual relationship between owner-managers and firm capabilities, bearing in mind exogenous elements of the business such as govern- ment intervention, economic condition and others of the ilk, all of which are touted to affect the organisational performance. This book focuses on three main themes – characteristics of owner-managers, firm resources and management and external factors – and will display 20 case stud- ies of property developers in Malaysia, with each case study premised on the three themes. The case studies will be divided into three main sections comprising: Small- and Medium-Scale Private Housing Developers This section includes developers that are comparatively small to medium in size; engaged in development projects characterised by modest numbers on relatively small land banks, with average gross development value (GDV); and focused on specific locations. The bulk of Malaysian developers fall into this category, as are new market entrants, which may also include niche and boutique developers. However, players