PR1MA to fork out RM200mil in compensation for cancelled projects

Pavither October 20, 2020

With over 30 projects cancelled, PR1MA Corp Malaysia will have to spend up to RM200 million to compensate contractors involved in 1Malaysia Housing Programme’s (PR1MA) cancelled projects, reported The Malaysian Reserve (TMR) citing a source close to the matter.

The source noted that the over 30 PR1MA “sick projects” that were halted were higher than the 24 projects that the Ministry of Housing and Local Government (KPKT) announced last month.

And as a government-owned developer, PR1MA is expected to negotiate with the contractors on the amount of compensation, which is projected to go up to RM200 million.

The compensation will also involve an offset of land plots that are deemed not worth keeping by the agency, following the conduct of due diligence.

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

“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 contractors would also use the RM200 million to compensate PR1MA homebuyers who had already signed the sales and purchase agreement.

In September, KPKT Minister Zuraida Kamaruddin said the ministry approved the cancellation of 24 PR1MA projects to lower the company’s debt, which amounted to RM11 billion.

The move involved RM42 million in compensation.

Out of the 24 projects, the government and contractors of eight projects mutually agreed to terminate the contracts, said Zuraida, adding that some of the eight projects would be redeveloped as affordable homes.

Formed in 2013 under the Prime Minister’s Department, PR1MA’s vision was to develop affordable homes in Malaysia’s key urban centres for the middle-income group.

The agency pledged to deliver one million homes by 2020. However, it only managed to complete 16,682 units or 1.6% of the total houses by 2018, despite receiving over RM8 billion of government injection.

With this, the Cabinet decided to have KPKT absorb PR1MA.

Meanwhile, DPMM president Abdul Halim Husin called on PR1MA to reconsider offsetting the land value when compensating the contractors given that many companies are struggling to survive 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 revealed that most developers invested in PR1MA since they had been assured 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,” said Abdul Halim.

He added that contractors are also pessimistic on the government’s capacity to pay the compensation on time considering the challenging economic environment.

 

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