CAUSES OF ABANDONED CONSTRUCTION PROJECTS
E.H. YAP, H.C. TAN, and F.C. CHIA
Department of Built Environment, Faculty of Engineering and Science, Universiti Tunku Abdul Rahman,
Jalan Genting Kelang, 53300 Setapak, Kuala Lumpur, Malaysia.
Abstract: Abandonment of construction projects remains a serious problem in the Malaysian
construction industry. It affects not only the immediate house buyers but also other project players (e.g.
client, contractors and consultants) and the general public. In some occasions, it also involves the use of
public fund for the revival of abandoned projects. Despite this, there is a lack of research into this area.
This paper forms part of an ongoing research investigating how to help manage the problem with the aid
of information and communication technology (ICT). The paper presents the issues and impacts of
abandoned construction projects in Malaysia, and the review of available literature on the causes of the
problem. Subsequently, the result of an industry wide questionnaire survey involving 225 respondents
on the actual causes of abandoned construction projects in this country is presented and discussed.
Further analyses will be carried out and the results will be presented elsewhere.
Keywords: Abandoned construction projects; Causes; Information and communication technology.
Not all construction projects are completed on time or ahead of schedule. It is also not uncommon for construction
projects to be delayed, or in the worst scenario even abandoned due to various reasons. Abandoned project can be
defined as a project which has been 1) totally abandoned, or 2) indefinitely delayed for the purpose of this study.
Abandonment may happen at any stage of a project lifecycle and incur significant amount of loss. For a housing
project, the Ministry of Housing and Local Government‟s (MHLG) considers that it has been abandoned if there is
the signing of the Sales and Purchase Agreement (S&P) and inactivity at the construction site for 1 year either
after 1) the scheduled completion time, or 2) the date of the signing of S&P if the developer has collected 10
percent payment from the buyer (as cited in Khalid, 2005).
In December 2009, the Minister of Housing and Local Government revealed that there were a total of 136
abandoned housing projects involving 30,567 house buyers (Kong, 2009). The Plaza Rakyat, a RM1.5 billion mix
use project, remains abandoned even though it was scheduled to be completed in 1998 (Jayaraj, 2009). These are
some of the problems of abandoned construction projects plaguing the construction industry in Malaysia. Despite
the seriousness of the problems, there is a lack of research into this area. This paper is part of an on-going research
aimed to help manage the problem with the aid of information and communication technologies (ICT). This paper
covers a review of the existing literature on the potential causes of abandoned construction projects and the
associated issues. Then, it presents the findings from an industry wide survey involving 225 respondents on the
actual causes of abandoned projects in Malaysia. This is followed by the discussion on the result of the
questionnaire survey and further works.
2 Issues about abandoned construction projects
The abandonment of construction projects has resulted in many adverse consequences to the economy, society and
environment. Economically, it is a waste of useful resources. The consequences of abandoned projects are far
reaching as the construction industry plays a major role in the economy of a developing country like Malaysia. A
typical construction project involves many trades and participants, who are linked with other upstream and
downstream industries (Ng, 2009a). These include suppliers of construction materials, transportation companies,
manufacturers of plant and machinery, etc. If a public project is being abandoned, the economic impacts are never
directly felt by the general public as they are absorbed by the government‟s reserves. However, very often there
will be loss of opportunity for the public to benefit from the intended purposes of the projects (Bavani, 2009). For
private non-housing projects, the consequences are mainly limited to a few project players, i.e. client, contractors,
consultants, etc. Nevertheless, the affected parties may suffer devastating losses such as monetary losses, bad
reputation, and even bankruptcies.
For private housing projects, however, tens of thousands of house buyers are immediately victimised every year
(See Table 1). The impacts on the house buyers are twofold: Despite the fact that the purchased properties will not
be completed, the house buyers still have to service bank loans for the unfinished houses (NST Online, 2009; The
Star Online, 2009b) and meanwhile have to rent another house to stay (Chan, 2009; Ng, 2009a). They also suffer
losses for being unable to reap the benefit from potential property value appreciation and rental collection (Chow,
2009). Some house buyers have even been blacklisted by the banks as they fail to service their bank loans (Yip,
2009b; Yip, 2009a). Having been blacklisted, they are unable to buy another property unless they pay back their
loans (Yip, 2009b). House buyers of abandoned projects have often been left without any assistance from the
developer and have to resort to the tedious process of forming a committee to deal with the developers and the
authorities (Chan, 2009; Chow, 2009). There are some cases which have been dragged on for so long that some
owners have even passed away before plan to revive the project is in place (Chan, 2009). Although occasionally
settlements were reached between the developers and the house buyers, the settlement amount might be
disproportionate to the actual losses suffered by the house buyers (Lim, 2009; Yip, 2009b). The buyers are often
left with no choice but to reluctantly accept the settlement offered as they become financially stressed. For some
revived projects on leasehold land, owners are left with less years remaining on the lease after many years of
abandonment (The Star Online, 2009a). All these have negative effects on the image of the country in the eyes of
foreign property investors (Chang, 2009).
Apart from house buyers, developers, banks, land owners and government may also be the victim. For instance,
developers may suffer bad reputation and financial losses (Perumal, 2009a), banks suffer because of bad debts
(Kong, 2009), while land owners suffer because their lands are stranded (Tan and Rajendra, 2009). Government
may have to step in and public fund has to be utilised to revive abandoned construction projects (Chang, 2009).
The MHLG has to be burdened with the task of mediating between all the parties involved (Kong, 2009). When it
comes to legal battles, it incurs huge amount of expenses to all the parties involved.
Abandoned construction projects also affect the society and environment negatively. For instance, some
abandoned projects have pools of stagnant water that serve as breeding ground for mosquitoes (Bavani, 2009;
Stuart, 2009) and threaten public health. Abandoned construction projects also attract people like drug users,
criminals and vagrants to occupy the abandoned sites (Chan, 2009; Perumal, 2009b) and hence threaten public
security. Abandoned construction sites may pose danger to anyone who ventures into it particularly children who
venture into the area to play (Stuart, 2009). Abandoned construction projects affect the environment negatively as
it may be used as a rubbish dump (Bavani, 2009) and for the sludge discharged (Phuah, 2009). Also, some have
become unsightly due to becoming overgrown with undergrowth (Bavani, 2009).
Even though the problems of abandoned construction projects are far reaching, there is hitherto a lack of
research into this area. Khalid (2005), Ibrahim (2006) and Rusli (2006) have done similar researches, but they
have only focused on housing projects. Khalid (2005) has proposed to investigate the causes from an institutional
perspective. Institutions, according to Khalid (2005) are such as regulatory policies, planning system, market
aspects, and financial institutions. However there is no publication from Khalid (2005) discovered showing the
outcome of his research. Ibrahim‟s (2006) study is based on literature review, interviews and case studies;
Whereas, Rusli‟s (2006) study is based on literature review and interview with the Ministry of Housing and Local
Government. Therefore, there is a need for research that investigates the causes of abandoned projects from an
industry wide perspective facilitated by a questionnaire survey involving the key players, i.e. developers,
contractors, consultants and related bodies, covering housing and non-housing projects. This will allow for a more
comprehensive view of the problem of abandoned project in this country to be obtained.
Table 1 Statistics on abandoned housing projects
Total number of abandoned housing projects (Peninsular Malaysia)
No. of projects
No. of houses
No. of buyers
Estimated Value (RM million)
Unmarked - Ministry of Housing and Local Government (HBA, 2006)
* Minister of Housing and Local Government (Kong, 2009)
3 A review of the causes of abandoned construction projects
It is found that existing literature on this subject is limited to the types of sources such as unpublished thesis,
conference papers, and particularly news articles. The types of project discussed in these sources are mainly
housing projects. This may be due to the greater number of abandoned housing project and the fact that it has
greater immediate impact to the general public than commercial (e.g. office building) and government projects.
Generally, the majority of the causes of abandoned construction projects identified from existing literature can be
categorized into four groups, i.e. 1) mismanagement, 2) unfavourable government policies, 3) inefficient public
delivery system, and 4) unfavourable economic conditions.
Mismanagement is one of the causes of abandoned housing projects given by the Minister of MHLG Kong Cho
Ha (as cited in Kong, 2009). Examples of mismanagement that may lead to abandoned housing projects are 1)
lack of proper feasibility studies (Ibrahim, 2006) particularly inaccurate market research and study (Kong, 2009),
2) unattractive marketing strategies (Ibrahim, 2006), and 3) incompetent and poor financial management by the
developers (Ibrahim, 2006). The first two of these examples are particularly concerned with the sales of house
units as important source of cash flow for housing developers. The lack of proper feasibility studies and inaccurate
market research and study may result in unsuitable project scheme to be undertaken for the prevailing market.
Therefore, a wrong decision might be made to undertake a project which is in fact less feasible than expected.
Unattractive marketing strategies may further exacerbate a less attractive scheme of project already undertaken by
a developer. Ibrahim (2006) also points out that mismanagement may happen due to the lack of experience of
Causes of abandoned housing projects related to unfavourable government policies are 1) the sell-then-build
system (Chang, 2009), 2) unavailability of Home Indemnity Insurance (Ibrahim, 2006), 3) limitation of the
jurisdiction of the Tribunal for Homebuyer Claims (Ibrahim, 2006), and 4) unfavourable planning and land policy
(Khalid, 2005). The sell-then-build system is intended to enable more houses to be built at a faster rate and a
lower price (Chen, 2007). As the name implies, houses can be sold before the houses are being built, therefore
more cash flow from the start of the construction phase and less requirement for the developer‟s own capital. This
has enabled more developers of smaller capital to be involved in the business. However, according to Chang
(2009) having smaller developers in the housing industry is the main cause of the abandonment of housing
projects. Being small, these developers have to rely critically on their sales to meet their cash flow. The sell-then-
build system as a cause of abandoned housing projects is also supported by Former Prime Minister Abdullah
Ahmad Badawi (HBA, 2006) and the President of Federated Association of Consumer Malaysia (FOMCA) (as
cited in Khalid, 2005). Home Indemnity Insurance, as practiced in Western Australia, Australia is an insurance
policy which a builder is required by law to take out on behalf of the homeowner to assist to ensure that the house
can be finished in the event that the builder dies, disappears or becomes insolvent (Government of Western
Australia, 2008). The Tribunal for Homebuyer Claims is a channel for aggrieved homeowner to seek redress
against developers without having to go through a lengthy legal process (Chen, 2007). Contrary to Ibrahim‟s
(2006) finding, Chen (2007) claimed that the Tribunal for Homebuyer Claims has proven to be very effective. It is
however believed that how limited the jurisdiction of the Tribunal or how effective it is to help homeowners seek
redress do not cause the abandonment of housing projects as it is only relevant after housing projects have been
abandoned. In other words, it is believed that Ibrahim (2006) and Chen‟s (2007) arguments only serve to reflect
the effectiveness of the Tribunal as a remedy to already abandoned housing projects rather than being the cause of
the abandonment. As for unfavourable planning and land policy, the specific planning and land policy which is
unfavourable was not given by Khalid (2005).
Chen (2007) however argues that it is inefficient public delivery system rather than unfavourable government
policies that causes the abandoned project problem. Lack of enforcement of control and monitoring by the
government as a cause of abandoned housing projects is also mentioned by Ibrahim (2006). Ibrahim (2006) states,
among others, that there should be stricter licensing for developers, better system to detect abandonment of
projects, harsher punishment for errant developers, and less bureaucracy in the approval process of housing plans.
Many sources give economic crisis or financial crisis as a cause of abandoned construction projects (e.g. Khalid,
2005; Ng, 2009b; Lim, 2009; Fernandez, 2009). Other unfavourable economic conditions that may lead to the
problem include 1) the rise of the prices of raw material such as steel and cement in 2008 (Cheah, 2008), 2)
“selfish” financial system, i.e. one that “lends an umbrella on a fine day and takes it away when it rains” (Chen,
2007), 3) higher interest charge that discourages potential home buyers to buy residential properties and reduces
the profitability of a project (Ibrahim, 2006), and 4) competition of new residential projects (Ibrahim, 2006) that
affects the sales and hence the cash flow of a project.
Apart from that, a number of sources cited financial problems as a cause of abandoned construction projects
(Khalid, 2005; Kong, 2009; Rajan, 2005; Ibrahim ,2006; Rusli, 2006; Bavani, 2009). However, it is felt that
financial problem is the combined effect of the aforementioned four groups of causes prior to being abandoned.
For instance, the lack of proper feasibility study to determine the right type of development and unattractive
marketing strategy which ultimately affects the sales and hence lead to financial problem.
It is noticed that a big proportion of the available literature (which is mainly news articles) lacks credibility and
cannot be held as conclusive findings to represent the causes of abandoned construction projects in Malaysia. In
addition, almost all of the literature available is concerning abandoned housing projects rather than a fair mix of
housing, commercial and government projects. Therefore, a more detailed research concerning abandoned
construction projects in Malaysia is necessary.
4 Questionnaire survey
The questionnaire requires the respondent to rank a list of potential causes of abandoned construction projects on
a five point Likert scale, i.e. 5 for „strongly agree‟, 4 for „agree‟, 3 for „neither agree nor disagree‟, 2 for „disagree‟,
and 1 for „strongly disagree‟. The list of potential causes of abandoned construction projects (See Table 3) is the
result of an extensive review of existing literature on factors affecting the success of projects done in an earlier
research (Yap and Tan, 2009).
A total of 2500 questionnaires were sent out, of which 225 complete responses were received. Thus the
response rate is 9 percent. Most of the questionnaires were sent out via the postal service to a mix of construction
related companies/organizations in Malaysia in 2009. The roles of the 225 respondents are summarized in Table 2.
It is found that the proportion of respondents are well distributed among the clients/owners, consultants and
contractor/supplier, except for government officials.
The analyses include the ranking of the causes of abandoned construction projects, and Spearman‟s rank
correlation to test the following null hypotheses:
H01: there is no difference of ranking of the causes of abandoned construction projects between
contractor/supplier and client/owner
H02: there is no difference of ranking of the causes of abandoned construction projects between
contractor/supplier and consultant
H03: there is no difference of ranking of the causes of abandoned construction projects between
client/owner and consultant
Table 2 Roles of 225 respondents
Roles of respondents
4) Government official
5 Findings of questionnaire survey
The ranking of the causes of abandoned construction projects is depicted in Table 3. The causes ranked 1 to 5
seem to focus on financial issues, i.e. financial difficulties faced by the owner, financial difficulties faced by the
contractor, unexpected bad economic conditions, inappropriate mode of financing project, and delays in interim
payments. This is followed by causes ranked 6 and 7, i.e. inadequate project feasibility studies and incompetent
contractors or subcontractors respectively. Subsequently, causes ranked 8 to 11 appear to focus on project
management and administration problems, i.e. project control problems, inappropriate project planning and
scheduling, bureaucracy and red tape within the project, and poor contract administration. Then this is followed
by the cause ranked 12, i.e. inexperienced client/owner. Causes ranked 13 and 19 seem related to ineffective
authorities, i.e. unfavorable government policy, and lack of cooperation from local authorities. Causes ranked 14,
15, 17, 18 and 20 appear to focus on legal and contractual matters, i.e. fraudulent practices and briberies, litigation,
lack of appropriate dispute resolution method, faulty tender process, and inappropriate contract arrangements
(traditional design-bid-build/design and build/management contracting/etc.). Cause ranked 16 is inappropriate
pricing/incentives of services rendered by contractors or consultants.
Spearman‟s rank correlation was performed to test the hypothesis that there is difference of ranking between 1)
contractor/supplier and client/owner, 2) contractor/supplier and consultant, and 3) client/owner and consultant as
to the causes of abandoned construction projects in Malaysia. The results are shown in Table 4, and it is found that
there is significant correlation at the 1% significance level between 1) contractor/supplier and client/owner, 2)
contractor/supplier and consultant, and 3) client/owner and consultant. In addition, when government official and
„others‟ group of respondents are included into the Spearman‟s rank correlation pairwise comparison with all
other roles of project participants, it is found that all tests correlated significantly at the 1% significance level,
except for the correlation between consultant and government official which is significant at the 5% significance
level. Hence, all the three null hypotheses can be accepted concluding that the contractor/supplier, client/owner
and consultant do not perceive the causes of abandoned construction projects differently.
Table 3 Causes of abandoned construction projects ranked by 225 respondents
Financial difficulties faced by the owner
Financial difficulties faced by the contractor
Unexpected bad economic conditions
Inappropriate mode of financing project
Delays in interim payments
Inadequate project feasibility studies
Incompetent contractors or subcontractors
Project control problems
Inappropriate project planning and scheduling
Bureaucracy and red tape within the project
Poor contract administration
Unfavorable government policy
Fraudulent practices and briberies
Inappropriate pricing/incentives of services rendered by contractors or consultants
Lack of appropriate dispute resolution method
Faulty tender process
Lack of cooperation from local authorities
Inappropriate contract arrangements (traditional design-bid-build/design & build/management
Unclear lines of responsibility and authority
Problems of communication and coordination
Poor quality control
Site acquisition problems
Negative impact of project towards society or environment
Inappropriate risk allocation among project team members
Shortage of site workers
Poor relationship among project team members
Unskilled/incompetent site workers
Ambiguities or mistakes in scope of work, specifications or drawings
Problems related to change orders/variation orders
Involvement of large number of participants of project
Lack of motivation of site workers
Relationship between contractor and labor (industrial relation)
Unavailability of materials and equipments
Poor safety management on site
Cultural clash among parties involved in project
Unexpected location difficulty
Adverse weather or acts of God
Difficulty of design and construction
Table 4 Spearman's ranking correlation of different roles of project participants (N = 41)
**. Correlation is significant at the 0.01 level (1-tailed).
*. Correlation is significant at the 0.05 level (1-tailed).
From the results of the ranking of the causes of abandoned construction projects, it is found that causes ranked 1,
3, 6, 12, 13, and 19 correspond with the causes found in the literature, i.e. financial difficulties faced by the owner,
unexpected bad economic conditions, inadequate project feasibility studies, inexperienced client/owner,
unfavorable government policy, and lack of cooperation from local authorities. Other causes identified, which are
closely related to that found in the literature, are those ranked 2, 8, 9, 10, and 11, i.e. financial difficulties faced by
the contractor, project control problems, inappropriate project planning and scheduling, bureaucracy and red tape
within the project, and poor contract administration. A number of important causes which have not been
mentioned in previous research are also identified. These are causes ranked 4, 5, 7, 14, 15, 16, 17, 18, and 20, i.e.
inappropriate mode of financing project, delays in interim payments, incompetent contractors or subcontractors,
fraudulent practices and briberies, litigation, inappropriate pricing/incentives of services rendered by contractors
or consultants, lack of appropriate dispute resolution method, faulty tender process, and inappropriate contract
arrangements (traditional design-bid-build/design and build/management contracting/etc.).
It is found that a significant proportion of the top 20 causes of abandoned construction projects either weakly
correspond with or are not found in the literature. This research has therefore helped to shed some light onto the
causes of abandoned construction projects but at the same time also raised more questions. More research have to
be conducted as to why certain causes are ranked highly by the industry, or can the causes of abandoned
construction projects identified in this paper be simplified into fewer underlying causes. For instance, cause
ranked 2 “financial difficulties faced by the contractor” raises the question as to why the client/owner could not
replace the contractor once he is found to face financial difficulties. In addition, it is also not clear at this stage as
to why the financial difficulties of a contractor can ultimately lead to the abandonment of a project. Further
analyses (e.g. ANOVA and factor analysis) and interviews will be conducted to further explore the issues.
7 Conclusions and further works
This paper has reviewed the issues pertaining to abandoned construction projects, i.e. adverse consequences of
abandoned construction projects to the economy, society and environment, and the lack of research into this area.
The causes of abandoned construction projects identified from existing literature mainly focus on issues
concerning mismanagement, unfavourable government policies, inefficient public delivery system, and
unfavourable economic conditions. It is found that the relevant literature available is mainly news articles which
lacks credibility and focuses mainly on abandoned housing projects. A more detailed research into abandoned
construction projects in Malaysia is therefore required. The result of an industry-wide questionnaire survey
conducted, which involved 225 respondents, revealed that the top 10 causes of abandoned construction projects in
Malaysia are: 1) financial difficulties faced by the owner, 2) financial difficulties faced by the contractor, 3)
unexpected bad economic conditions, 4) inappropriate mode of financing project, 5) delays in interim payments, 6)
inadequate project feasibility studies, 7) incompetent contractors or subcontractors, 8) project control problems, 9)
inappropriate project planning and scheduling, and 10) bureaucracy and red tape within the project. Spearman‟s
rank correlation was performed and it is found that there is a strong consensus of ranking between the different
roles of project participants on the causes of abandoned construction projects. The questionnaire survey has
helped to shed some light onto the causes of abandoned construction projects as it has identified a number of
important causes of abandoned construction projects which are not mentioned in the existing literature. Further
research will be conducted and the findings will be presented elsewhere.
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