Land Development Process in Malaysia

Looking from the Malaysian land administrative perspective, land development in Malaysia simply means the change of original use of any alienated land that effects its restriction in interest, express conditions and category of land use as opposed to what has been earlier approved by the State Authority upon alienation (Abd Kadir Al-Haj, 1995). Interestingly, land development is no where mentioned under the National Land Code (NLC) which is the governing code for land administration in Malaysia. Under the Code, land development however takes place in one or more of the following forms:-

  1. Variation of conditions, restrictions and categories (Section 124)
  2. Sub-division (Sections 135 – 139)
  3. Partition (Sections 140 – 145)
  4. Amalgamation (Sections 146 - 150)
  5. Simultaneous applications for sub-division and variation of conditions, restrictions and categories (Section 124A), and
  6. Surrender and re-alienation - special provisions (Sections 204A – 204H)

Thus, in cases where the land chosen or acquired for the purpose of development is still in its agriculture status, the application for the conversion (to building or industrial status), sub-division, partition or amalgamation of land, wherever applicable, must be obtained first before any actual development can take place.

In Malaysia, there have been regular occurrences in the past whereby decision for land development was initiated by the government especially if it is recognized that development of certain land not necessarily idle or under-developed, is essential in fulfilling certain urban planning policies of the government. Two good examples are the acquisition of urban land for the light rail transit project and the acquisition of mainly estate land for the Putrajaya development. In some cases however, even though the government initiates the development plan which may involve acquisition of private-owned land, the implementation of the actual development is still usually offered to private developers. 
The stages involved in land development for this instance whereby the state government played the role as the initiator and the role of the developer was taken by a private entity.

Property Development and the Need For Re-development

Closely related to the term “Land Development” is the term “Property Development”. There are various definitions by scholars on the term ‘Property Development’. The one that best encapsulates its meaning and processes involved is given as follows:
Property development is a process that involves changing or intensifying the use of land to produce buildings for occupation. Property development is an exciting, at times frustrating, complex activity involving the use of scarce resources. It is a high risk activity which often involves large sums of money tied up in the production process, providing a product which is relatively indivisible. The performances of the economy, at both national and local levels, directly influence the process.

Cadman and Topping (1:1995)

Development comprises the following aspects:

  1. Perception and estimation on demand for various categories of new building
  2. Identifying and ensuring safety of site before building is built on it to meet the demand
  3. Designing accommodation to meet the demand for the identified site
  4. Long term or short term financing to fund the acquisition of and construction on the site
  5. Design management and construction, and
  6. Leasing out and management of completed building.”

On the other hand, the Town and Country Planning Act 1976 (Act 172) of Malaysia defines property development as the carrying out of any building, engineering, mining, industrial or other similar operations in on, over or under land, or the making of any material change in the use of any buildings or other land, or the subdivision or amalgamation of lands. Thus, in broad terms, development can be divided into two categories, one being the carrying out of physical operations such as building or engineering works, and the second the making of a material change of use (Cadman et al., 1994)

Property development can be divided into three prominent stages, namely:

  1. Pre-development stage comprising sub-stages of idea initiation (decision to develop), site selection, feasibility, financing and planning consents
  2. Development stage comprising sub-stages of tendering, construction, project management, leasing, financing and sale (disposal)
  3. Post-development stage comprising sub-stages of maintenance, management, leasing, financing and sale (disposal)

On the other hand, there is also new school of thoughts (Tan, 1998) that contend that property development contains only two prominent stages; pre-development stage which combines all the sub-stages in the old school of thoughts’ pre-development and development stages; and post-development stage comprising the same sub-stages identified by the old school of thoughts.

Perhaps the definition that is more relevant to be looked into in relation to the subject matter of this study is the one given by Byrne and Cadman (1984) who have divided the development process based on the perspective of uncertainty analysis which relate to the aspect of viability of a development into three stages:

  1. Acquisition
    In this stage, development process involves land acquisition upon which the development is to be carried out. There exists the element of uncertainty in this stage due to physical features of the land, restriction in interest in the land ownership which may benefit the land or otherwise and natural features and type of land use allowed or approved by the local planning authority.
  2. Production
    This stage is when the construction of building takes place and the risk and uncertainty that exists here is in the form of construction cost which constitutes the second capital outlay. As such the provision for risk is included when deciding on the building contract.
  3. Disposal
    This stage is when the completed building is owner-occupied, single or multi occupied or disposed of as investment item. Risk and uncertainty exist in this stage when disposal is by way of renting and selling whereby rental and return on investment and purchase price contain risk element since the result of the development must be produced first even though the developer cannot guarantee or know for sure that the stability of the market at the beginning of the development is to last right till the disposal stage. 

This article written by :
Sr Puan Nik Nazariah bte Nik Jaafar
Associate Director of
NILAI HARTA CONSULTANT SDN BHD
Research Department of NHCSB
25 Feb 2009.