Investment in a range of property, from low-cost housing to top-end resorts, is driving Sabah’s construction and real estate sector, while labour reforms may be set to keep costs for contractors down.
Some 20,000 affordable housing units will be built in Sabah over the next five years under a new partnership formed between the Sabah Housing and Town Development Authority (SHTDA) and Malaysia’s Probil Sonati Development, local press reported on February 8. The project’s launch follows the previous signing of a memorandum of understanding between the partners.
The RM2bn ($627m) project is due to be executed in four phases and has the backing of big-name financial institutions Bank Rakyat, Maybank, EON Bank and Etiqa Insurance. To prevent oversupply of units, which could erode property values in the Malaysian state, the project’s progress will be incremental and based on demand, according to Ir Nik Mokhtar Hassan, the chairman and president of Sonati Group. The first phase is expected to commence in May of this year, and 6000 units of terraced housing should be completed in two years in Kunak, Kudat and Sandakan, at a cost of RM616m ($193m).
Over the longer term, the partnership expects to build a range of low-cost properties, including apartments, bungalows and semi-detached houses. Prices will range between RM85,000 ($27,000) and RM2m ($627,000), depending on the unit – relatively affordable in a country in which the supply of budget housing has been a concern. The unit models and main fittings will be fairly basic, but SHTDA general manager Jenar Lamda has stated that they may include some modern amenities such as wireless internet, which is widely seen as important to improving the economic and educational chances of the less affluent, particularly the young. “The demand for such housing is there. Through this project, we hope the mission of the government to provide affordable homes will be achieved,” Jenar told local press.
The construction sector, including the low-income segment, may also benefit from the liberalisation of labour legislation. In January, Sabah Chief Minister Musa Aman announced that construction would be one of four industries allowed to hire workers from Vietnam, Bangladesh, Myanmar and Nepal, in addition to Indonesia and the Philippines.
The new rules may help keep construction costs down by allowing contractors a wider pool of workers and letting them bring in low-cost labour. While around 50% of Sabah’s construction workers are local, they tend to prefer to work on temporary contracts while seeking more lucrative work.
“The contractors to whom we subcontract the development projects have mentioned this problem and we have jointly requested in the past to hire workers from countries other than the Philippines and Indonesia,” Sabah Housing and Real Estate Developers Association’s (SHAREDA) president, Susan Wong, told local press.
“Since the construction sector is one of the sectors allowed to hire from these new sources, we are happy as it means more choice for us. We always prioritise locals but it is tough,” said Wong. “If they have better prospects they may leave the job, that is natural. That is why we need the foreign workers to take over when that happens.”
Demand for construction is growing in Sabah due to economic expansion, a burgeoning tourism sector and demographic factors, and the real estate market is attracting more and more attention from investors. In January 2011 during a visit to Brunei the deputy prime minister of Malaysia, Muhyiddin Yassin, said that the Sultanate was actively seeking investment opportunities in real estate in Sabah as part of its ongoing efforts to diversify its foreign investment portfolio. The hotel and resort segment is thought to be particularly attractive to Brunei, as Sabah looks to build up high-end tourism and attracts more business visitors.
Demand from home and abroad is likely to keep developers and contractors in Sabah happy over the coming years. While the market may be smaller than some others in the region, the opportunities for growth are good.