Housing for foreign workers opens up new opportunities for developers

Overdependence on foreign workers is an issue Malaysia continues to grapple with and while it takes time and committed policies to effect change, one area that is growing in importance is their housing.

There wouldn’t have been a better time for the problem to erupt, but during the early stages of the Covid-19 outbreak, when it peaked last year with allegations of forced labor and accommodation poor.

Homes for foreign factory workers and construction sites became the center of attraction for the wrong reasons when several Covid-19 clusters were detected, which, again, highlights the poor living conditions and the overcrowded conditions they faced.

A London-based Modern Slavery and Human Rights Policy and Evidence Center research project on “Forced labor in the medical glove supply chain in Malaysia during the Covid-19 pandemic,” which was published earlier this month, noted that accommodation was a major concern, with more than half of 1,491 workers surveyed saying it was crowded, leading to lack of privacy, insufficient toilets and overheating.

This is also one of the reasons why the Ministry of Human Resources amended the 1990 Law on Minimum Standards for Housing and Equipment for Workers (Law 446) earlier this year, which gives the Ministry the power to act against misplaced employers in housing matters.

This leaves no room for companies but to solve the housing problem and the process of solving these problems should be a boon for real estate developers and players in the construction industry.

For example, Top Glove Corp Bhd said in December 2020 that he spent around 20 million RM to buy 100 units of apartments to serve as hostels for workers and 50 million RM for 100 two-story houses and hostels.

Malaysian Real Estate Developers Association (Rehda) President Datuk Soam Heng Choon told StarBizWeek that the business model of dormitories or housing for factory and manufacturing workers is definitely something that developers are considering.

“If there is demand, if there is money to be made, companies will certainly invest in it. For real estate developers, this is another area they can look at.

“It’s more of a rental model. You have to have deeper pockets to own it as an investment property, like owning a hotel, but of course it’s a long-term lease to factories, ”says Soam.

He notes that this may not be everyone’s cup of tea as units cannot be sold and you need to have a strong balance sheet to be able to own properties for recurring income.

As for the construction sites, Soam says that it is quite difficult because the accommodation is always rather temporary.

“Developers can’t build something and then tear it down two years later.

“What they need to do is some more permanent type of accommodation and run it like a hotel or hostel or dormitory for workers as they call it in Singapore.

“It’s a business model that can work,” he says.

Savills Group Managing Director (Malaysia) Sdn Bhd Datuk Paul Khong (pictured below) says that with more and more employers looking for better accommodation, the demand for rental of suitable residential properties use in a youth hostel will be higher in the short and medium term.

He points out that there are quite a few residential properties in the worker hostel category available anywhere and the industry still has a long way to go.

“Various factors are now being reconsidered to determine such accommodation, such as distance, rental rates, travel time and allocated budget.

“It’s basically a compromise between renting accommodation and distance or travel costs.

“It will be a cost sensitive exercise for employers because it will lead to increased costs for workers in the future,” he says.

Khong adds that some companies have approached Savills (Malaysia) to help them acquire poor or old commercial and industrial properties that they can convert into a hostel at an affordable price, subject to local authority approval.

Among the targeted areas are those in the immediate vicinity of various industrial projects and older commercial areas.

“They plan to address worker housing issues for employers as a business strategy with support from investors.

“We expect that there will be more developers or large employers who will head to this space to provide hostels to meet these demands, but with rising land prices and low rental yields, it will be a long journey ahead.

“If there are cheap land options, there will be more supply for such development,” Khong says.

CBRE | WTW Group Managing Director Foo Gee Jen (pictured below) agrees that the requirements for proper housing are an opportunity developers can consider.

CBREFoo GeeCBREFoo Gee

From a real estate perspective, he believes these will give a boost in terms of accommodation and better use of land.

He says there are already several owner-operators or who specialize in running hostels and worker housing.

“I believe there is a market for it. For a city like Kuala Lumpur, there is still a lot of construction activity going on and rather than accommodating foreign workers at sites or stores, it is time for us to take a look at areas where all can be centralized into one. only place.

“There are a lot of messy and unsanitary ‘kongsi’ houses on construction sites.

“Maybe if anyone can develop … a need to escort and transport workers to the site.

He says there is a need for companies to step up their efforts in terms of compliance issues, especially when the focus is on the responsible business alliance (RBA).

“These are very basic human rights and needs. Unfortunately, we still fail to meet very basic needs, not just for foreign workers, even local workers.

“We have to look at the totality, even learning from the mistakes made by Singapore, where the largest cluster of Covid-19s came from a very systematic neighborhood of foreign workers,” he says.

Whole Gain Sdn Bhd Marketing Director Shaun Chew said the spread of Covid-19 in the manufacturing and construction sectors may be due to the inadequate or cramped housing in which foreign workers are housed.

Whole Gain is a modular building systems (MCS) company where approximately 85% of the components of a unit or house are fabricated or built in a factory, ready with the mechanical and electrical components before they are transferred. on the installation site.

“We’re definitely seeing more demand now, but there’s not much we can do because of the Enhanced Motion Control Order (EMCO) now.

“We are cooperating with some companies to study this and we want to build more and there are a few places that we have identified, especially in mature industrial areas,” he says.

Chew adds that their dormitory concept will allow foreign workers to stay within the community and their central kitchen concept that can support daily meals leads to a healthier lifestyle and a more hygienic environment.

Whole Gain will also be working on a dormitory in Klang to accommodate 12,576 people, pending signatures for the necessary approvals.


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About John McTaggart

John McTaggart

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