Abandoned Project? Here's How to Claim Your Money

Introduction

Buying a home is usually one of the biggest financial commitments a person will make. You sign the Sale and Purchase Agreement (SPA), pay your deposit, secure a housing loan and begin looking forward to the day you receive the keys. But what happens when construction suddenly stops, the site goes quiet and the developer appears to have disappeared? For some buyers, the result is an abandoned housing project and the frightening possibility of continuing to pay for a home that may never be completed.

This is not an isolated problem in Malaysia. As of 2025, Malaysia had 112 abandoned private housing projects, with Selangor alone accounting for 42 of them, or approximately 37.5% of the national total. The situation can be particularly difficult because an abandoned project does not automatically cancel a buyer's housing loan. The loan agreement with the bank and the SPA with the developer are separate contracts, which means buyers may still have to meet their loan obligations even though they cannot occupy the property they are paying for.

Legal remedies and government assistance do exist, but recovering money can be complicated, particularly when a developer is financially distressed, bankrupt or no longer has sufficient assets. The government has acknowledged the seriousness of the issue and has set a target of achieving zero abandoned housing projects by 2030, supported by a RM1 billion guarantee fund and various project revival mechanisms. If you are already affected, it is important to understand your rights, the options available and the practical steps you can take.

Can You Legally Terminate Your SPA?

In certain circumstances, a buyer may legally terminate the Sale and Purchase Agreement. Section 8A of the Housing Development Act 1966 provides buyers with the right to terminate their SPA if the housing project has stopped progressing for at least six months, subject to the relevant requirements and procedures.

Generally, the buyer will need to establish that there has been no progress on the project for the required six-month period, counted from the relevant date under the SPA and applicable provisions. Written consent from the end-financier, usually the bank providing the housing loan, is also required. In addition, the Housing Controller must certify that the developer has stopped work on the project. Before 2015, buyers also needed the consent of 75% of the other purchasers before an SPA could be terminated under this mechanism, but that requirement has since been removed.

Once the SPA has been properly terminated, the developer is generally required to refund payments made by the buyer within 30 days. However, the legal right to a refund and the practical ability to recover that money are two different things. If the developer is already bankrupt or financially distressed, there may be limited funds or assets available. A buyer may obtain a legal order requiring repayment, but enforcing that order against a company with no meaningful assets can still be extremely difficult.

Developers may also face legal consequences for abandoning a project. Under Section 18A of the HDA, a developer who abandons a housing project can face fines ranging from RM250,000 to RM500,000, imprisonment of up to three years, or both. While these penalties may hold developers accountable, they do not necessarily guarantee that affected buyers will immediately recover the money they have already paid.

The Bank Loan Doesn't Automatically Stop

This is one of the most difficult realities for buyers: an abandoned project does not automatically end their housing loan obligations. The SPA and the loan agreement are separate contracts. Your agreement with the developer concerns the purchase and delivery of the property, while your agreement with the bank concerns the money that has been borrowed under the financing facility.

This means that even if construction has stopped, the bank may still expect the borrower to meet the repayment obligations under the loan agreement. The developer is generally not a party to that financing agreement, so the abandonment of the project does not automatically release the buyer from the debt.

However, affected buyers should not simply remain silent and continue paying without exploring their options. The first step should be to contact the bank formally and explain the situation in writing. Where available, attach evidence showing that the project has been classified as abandoned by KPKT or provide other official information regarding the project's status. Buyers may request assistance such as a loan moratorium or deferment, a reduction or waiver of certain interest charges, or loan restructuring that extends the repayment period and reduces the monthly instalment.

Some banks have previously provided payment assistance or deferment arrangements for buyers affected by abandoned projects, but these arrangements are generally discretionary rather than automatic. Buyers should therefore communicate with their banks as early as possible and keep records of all correspondence.

Where appropriate, buyers should also notify the bank in writing if they believe no further progressive payments should be released to the developer. Since banks also have an interest in protecting their security and ensuring that financing is properly disbursed, they may be willing to halt further releases depending on the circumstances and the terms of the financing arrangement.

Government assistance may also be available to certain affected buyers. KPKT may facilitate discussions with financial institutions, while some buyers may qualify for a second EPF withdrawal or other financial assistance programmes. Certain public sector borrowers may have access to interest-free financing assistance of up to five years through the Public Sector Housing Financing Board, while AKPK's debt management services may help eligible individuals restructure their broader financial commitments while the situation is being resolved.

How Can Buyers Recover Their Money?

There is no single solution that works for every buyer affected by an abandoned project. The appropriate route depends on the amount of money involved, the type of claim, the financial position of the developer and whether there is a realistic possibility that the project can be revived.

Option A: Tribunal for Homebuyer Claims (TTPR)

For smaller claims that fall within its jurisdiction, the Tribunal for Homebuyer Claims, or TTPR, can be one of the most accessible options. The tribunal was established under the Housing Development Act specifically to provide homebuyers with a lower-cost alternative to civil court for certain housing disputes.

Claims of up to RM50,000 can generally be filed through the tribunal, and the filing fee is only RM10. The process is intended to be more accessible to ordinary homebuyers and can be faster and less expensive than commencing a civil lawsuit. The tribunal can hear certain claims involving matters such as late delivery, Liquidated Ascertained Damages (LAD) and defects, subject to its jurisdiction and the applicable legal requirements.

Recent Federal Court decisions have also clarified that the RM50,000 limit applies on a per-claim basis. This may be significant for buyers who have different types of claims arising from the same property, although the circumstances of each case should be considered carefully before filing.

Option B: Civil Court

For claims exceeding RM50,000 or disputes involving more complex legal issues, civil court proceedings may be necessary. This could include claims for breach of contract, larger LAD claims, misrepresentation by the developer or legal issues involving developers that have been wound up or placed into insolvency proceedings.

Civil litigation, however, can be expensive and time-consuming. Buyers will usually need legal representation, and proceedings can take considerably longer than a tribunal claim. There is also an important practical issue: winning a case does not automatically mean the buyer will receive the money immediately. If the developer has no assets or is deeply insolvent, enforcing a court judgment may still prove difficult.

Option C: Liquidated Ascertained Damages (LAD)

LAD is a form of compensation that may be available when a developer fails to deliver the property within the agreed period. Depending on the terms of the SPA and the applicable legal framework, buyers may be entitled to compensation calculated based on the delay in delivering the property.

The amount is commonly calculated according to a specified rate based on the purchase price and the number of days of delay. This is why buyers should keep all relevant documents and payment records from the beginning of the transaction. In some situations, the booking fee payment date may also be relevant when determining the appropriate calculation period.

For an abandoned project that is never completed, the legal position may be more complicated. Buyers should therefore seek legal advice rather than assuming that a standard LAD calculation will automatically resolve the situation.

Option D: Government Revival and the "White Knight"

In practice, one of the most common ways an abandoned project is eventually resolved is through a revival process. This often involves another developer stepping in to rescue and complete the project. The industry sometimes refers to such a rescue developer as a "white knight."

The process may begin with KPKT assessing whether the project is financially and technically capable of being revived. If a workable solution can be found, the ministry or other relevant parties may facilitate the appointment of a new developer or rescue entity. The original developer may exit the project, often because of insolvency or financial difficulties, while the project is restructured and construction eventually resumes.

From 2023 to May 2026, KPKT's special task force reportedly revived 1,576 sick and abandoned projects involving 188,525 housing units, with a total estimated gross development value of RM148.21 billion. One example is the M101 Skywheel project in Kuala Lumpur, which affected 337 purchasers with SPAs worth more than RM306 million. GD Properties later stepped in as the rescue developer, the project was rebranded as KL360, and the High Court approved the recovery scheme in 2024.

For affected buyers, however, a project revival is not necessarily a simple solution. If a rescue developer is appointed, buyers may need to consider whether they would prefer a cash refund or continuing with the revived development, depending on the options available. The recovery scheme may also involve a revised completion timeline or changes to the original contractual arrangement. Buyers should carefully review any proposed recovery scheme before agreeing to it.

Check the Developer Before Buying

The best way to deal with an abandoned project is to reduce the risk of becoming involved in one in the first place. Although no buyer can completely eliminate the risks associated with an under-construction development, proper due diligence can provide important information before a major financial commitment is made.

Use the TEDUH Portal

The TEDUH, or Transforming and Empowering Data Usage in Housing, system is a public online portal that allows buyers to check information relating to licensed housing developers and property projects. It can provide useful information about matters such as the validity of a developer's licence, the status of its advertising permit, blacklist records, project status and progress, as well as certain complaint-related information.

When conducting a search, buyers should check the exact company name stated in the SPA. The project name may not be the same as the legal entity responsible for the development, and the name of a holding company may also differ from the company listed as the developer in the SPA. Checking the correct legal entity is therefore important.

As of 2025, 109 developers had reportedly been blacklisted by KPKT, with their directors barred from re-establishing themselves under new entities. Buyers can check relevant information through the TEDUH Portal.

Other Checks You Should Do

Online checks should not be the only form of due diligence. Buyers should visit the construction site and observe the actual condition of the development. A physical visit can provide information that may not be obvious from brochures, advertisements or a sales gallery. It may also be useful to observe whether construction activity appears consistent with the project's stated progress.

Researching the developer's past projects is also worthwhile. Where possible, speak to existing purchasers or owners to understand their experience with the developer, particularly in relation to construction quality, delivery timelines and after-sales service.

Buyers may also wish to investigate the developer's financial position where relevant information is available. Bankruptcy-related information can be checked through the e-Insolvensi system for the applicable fee. The land title should also be examined to determine whether the developer is the registered owner and whether there are any restrictions affecting the property or the ability to transfer or charge the land.

Most importantly, buyers should read the SPA carefully before signing. The SPA is the legal document governing the transaction and generally takes precedence over marketing promises made in brochures or sales presentations. Buyers should understand the payment schedule, completion obligations and relevant terms before committing themselves to the purchase.

Where applicable, buyers should also ensure that their payments are properly handled through the Housing Development Account. This provides an important level of protection for money paid towards a housing development.

What to Do If Your Project Is Already Abandoned

If you are already affected by an abandoned project, the situation can feel overwhelming. However, taking organised and documented action is far more useful than waiting for informal assurances or relying entirely on information circulating among other buyers.

Step 1: Document Everything

The first step is to gather and organise every document connected to the property purchase. This should include the Sale and Purchase Agreement, booking receipts and other proof of payment, correspondence with the developer, loan documents and bank statements.

Buyers should also keep a record of the booking fee payment date, as this may be relevant to certain LAD calculations. Save copies of emails, letters and relevant messages, and create both physical and digital backups where possible. If the matter eventually proceeds to the tribunal, court or another official body, having complete documentation can make a significant difference.

Step 2: Report the Matter to KPKT

The next step is to lodge an official complaint with the Ministry of Housing and Local Government. KPKT may investigate the project's status, provide official information and, where appropriate, explore options for intervention or project revival.

Buyers should avoid relying entirely on rumours, social media posts or WhatsApp group discussions. While these groups can be useful for sharing information, official confirmation of the project's status is important when dealing with banks, lawyers and government agencies.

Step 3: File With TTPR if Applicable

If your claim falls within the Tribunal for Homebuyer Claims' jurisdiction and meets the applicable monetary limits, filing a claim with the TTPR may be a practical option. The process is generally more affordable and accessible than civil court proceedings, with a filing fee of RM10.

Before filing, however, buyers should ensure that the type of claim and the circumstances fall within the tribunal's jurisdiction. If the matter is complex or involves a larger amount, legal advice may be necessary before deciding on the appropriate route.

Step 4: Consult a Property Lawyer

An abandoned project can involve several legal issues at once. These may include the possibility of terminating the SPA, claims for LAD, negotiations with the bank and potential civil action against the developer or other relevant parties.

A lawyer familiar with property law and the Housing Development Act can help buyers understand the available options and the possible consequences of each decision. Although legal advice involves additional cost, obtaining the correct guidance early may prevent buyers from making decisions that could create further financial or legal problems.

Step 5: If a Rescue Developer Is Appointed

If a rescue developer is appointed to revive the project, buyers should not assume that continuing with the project is automatically the best option. Every recovery scheme has different terms and may affect the original timeline, contractual arrangements and financial obligations.

Buyers should carefully review the proposed recovery plan and understand what will happen to their existing SPA and payments. Where options are available, it may be necessary to compare the possibility of a cash refund against continuing with the revived project. Buyers should also consider whether they can realistically accept a revised completion date or any proposed changes to the original agreement.

A revived project may offer the best chance of eventually receiving the property, but buyers should understand exactly what they are agreeing to before signing any new documents or accepting revised terms.

Conclusion

An abandoned housing project does not automatically cancel a buyer's bank loan, nor does it guarantee a full refund. Recovering money can be particularly difficult when the developer is bankrupt or has insufficient assets, but buyers are not necessarily without options. Depending on the circumstances, a buyer may be able to terminate the SPA, file a claim through the Tribunal for Homebuyer Claims, pursue civil action, seek LAD, negotiate with the bank or participate in a government-supported project revival. The right approach will depend on the specific facts of the case, which is why keeping proper documentation and seeking professional advice early can be important.

The best protection, however, remains prevention. Before committing to an under-construction property, buyers should check the developer's track record through TEDUH, verify its licence and blacklist status, visit the construction site, research previous projects and read the SPA carefully. Where applicable, payments should also be properly handled through the Housing Development Account. While the government is working towards its target of zero abandoned projects by 2030 and has revived many sick and abandoned projects, buyers still need to protect themselves. When hundreds of thousands of ringgit are involved, relying on brochures or hoping that problems will eventually disappear is not enough. Whether you are considering a purchase or are already affected by an abandoned project, understanding your rights and acting early can make a meaningful difference.