This article first appeared in The Edge Malaysia Weekly on July 22, 2024 - July 28, 2024

DEVELOPERS of private property projects will now need to up their game in using the Industrialised Building System (IBS) to get building plans approved by local government authorities where their projects are being built.

The IBS Content Scoring System (IBS Score), which developers need to meet to get approvals, has been raised to 70, from 50 previously, a practice that began in 2018. The higher IBS Score is for projects that have a value of RM50 million and above as well as a gross floor area of at least 50,000 sq m (538,195.52 sq ft).

In a circular released by the Ministry of Housing and Local Government Number 4/2024, the National Council on Local Government has agreed on the implementation of IBS Score 70 as a compulsory condition for the application of building plans.

The circular, effective from July 10 this year, detailed the guidelines for the monitoring and implementation of IBS, as well as the role of the Construction Industry Development Board (CIDB) as the external technical agency in the local government’s one-stop centre committee, to monitor the implementation of IBS for private projects.

“IBS is able to be the catalyst for increasing the productivity of the construction sector, as well as improving the competitiveness of local construction industry players. This will create more jobs based on expertise and expand the opportunities for Malaysians to earn better wages, as well as reduce the industry’s dependency on foreign workers,” the circular reads.

As a result of the higher IBS Score requirement, some developers are worried that it will lead to higher construction costs, as IBS costs are generally 5% to 15% more than traditional methods.

The developers say the government should provide more incentives to both IBS producers and the construction industry to use IBS, so that the cost of using the system is competitive compared with the traditional method of building.

One construction executive suggests that the government allows for a higher plot ratio for property developments that use a higher proportion of prefabricated components. In this way, the government would be able to entice more developers to invest in IBS capabilities and capacities.

“A higher plot ratio will enable developers to earn more, which can then cover the higher costs associated with using IBS, especially for smaller developers, which do not have the capacity to invest in IBS plants, as they do not build massively,” says an officer at a large construction group.

“Large developers such as Gamuda Land and Sunway can implement IBS in a big way because they have large land banks and develop thousands of homes and other buildings every year.”

IBS is a term used to refer to various prefabricated construction methods, whereby the components are constructed separately beforehand, and assembled on-site afterwards. It involves components of various scales and sizes, from wall sections to full-scale building floors.

Every building component prefabricated is given an IBS score factor, which will then be totalled up to reach the final score. For example, for slabs or flooring systems, prefabricated columns and beams or load-bearing walls are given an IBS factor of one.

The coverage or use of these prefabricated columns and beams will be multiplied with the IBS factor to give an IBS Score. IBS Score calculations are provided in detail by CIDB, and the self-declaration of the use of prefabricated systems will be monitored and certified by the agency.

CIDB is only an external technical agency with the OSC of the local councils. The approvals of building plans are still within the purview of the respective local councils, and not all local councils have already required a mandatory minimum IBS Score. This is because IBS is still not widely available throughout the country.

A construction executive says some states do not have IBS capacity, and if the regulation is made compulsory by their local governments, construction players will have to source prefabricated components from out of state.

“In Sarawak, for example, the IBS capacity is still small, but the construction sector is growing. They cannot have high IBS Scores there,” he says.

Sarawak Consolidated Industries Bhd (KL:SCIB) and Cahya Mata Sarawak Bhd (KL:CMS) are among the major producers of IBS. SCIB produces precast concrete building systems, hollow core slabs and wall panels; CMS produces a wide variety of precast components, including staircases.

According to CIDB, there are 13 IBS suppliers and manufacturers in Sarawak; nine are located in Kuching, three are in Sibu and only one is in Bintulu. Since Sarawak is a large state, mandatory requirements for the IBS Score will involve tremendous supply chain challenges.

The Kuching division has the largest population in Sarawak, where most of the state’s demand for housing and commercial buildings is concentrated; and the Sibu division has the third-highest population after Miri.

There are no IBS suppliers or manufacturers listed by CIDB in the Miri division. The Bintulu division, which S Frame Buildtech Sdn Bhd belongs to, is about 200km away from Miri. S Frame produces only light-gauge, cold-formed, steel framing solutions used for roofing, wall panels, floor joist and staircase structure.

It is not clear how the mandatory minimum IBS Score of 70 can be achieved in states where the capacity for IBS is still not enough for local property developers to implement it.

In the peninsula, IBS suppliers are more widely available and have large-scale fabri­cation plants.

Construction players and property developers that have large-scale fabrication plants in the peninsula include MGB Bhd (KL:MGB), which has two IBS manufacturing plants with the capacity to build more than 6,000 units of properties a year.

MGB has even secured purchase orders from Sany Alameriah for the latter’s contract in Jeddah, Saudi Arabia. The contract was for a total of SAR94.5 million (RM119.55 million) for the supply and installation of precast elements such as walls, staircases, beams and hollow-core slabs for 400 villas in ROSHN’s Alarous development located north of Jeddah.

Another major player is IJM Corp Bhd (KL:IJM), which has an IBS plant in Kuala Selangor that has the capacity to produce 500,000 sq m, or 3,000 homes, a year. S P Setia Bhd (KL:SPSETIA) has two precast facilities in Subang and Setia Alam, Selangor, which have combined production facilities equivalent to 4,500 apartments a year.

In 2017, Country Garden Pacificview Sdn Bhd, the local subsidiary of China’s Country Garden Group, which was then developing the Forest City project in Iskandar Puteri, launched an 18-acre IBS plant that has the capacity to produce 260,000 cu m of materials.

The output capacity is said to be enough to cover one million sq m of built area, or 9,000 apartments, a year. It was recognised as the largest IBS plant in the country in 2019.

This title might have been taken over by Gamuda Bhd’s (KL:GAMUDA) IBS facilities in Banting and Sepang, though. According to Gamuda, its facilities have the largest manu­facturing capacity in Malaysia — 10,000 homes annually.

Sunway Construction Group Bhd (KL:SUNCON) is also a major player in IBS construction. The group has three IBS facilities — two in Johor and an Integrated Construction and Prefabrication Hub in Pulau Punggol Barat, Singapore.

The Johor facilities have a combined annual capacity of 126,000 cu m of precast products; and the Singapore facility, a joint venture with Hong Leong Asia Ltd, has a maximum annual capacity of 48,000 cu m.

The Singapore precast orders comprised 10% of SunCon’s outstanding order book of RM6.3 billion as at March 2024, according to the group.

Based on data from the Implementation Coordination Unit of the Prime Minister’s Department, the IBS rate for government projects reached 91.5% in 2022. Data from the IBS Malaysia 2021 report by the Construction Research Institute of Malaysia shows, however, that private projects had reached only 60% of IBS usage.

“Rehda welcomes the call by the government, which would lead to the implementation of a more sustainable practice in the building industry,” says Real Estate and Housing Developers’ Association president Datuk Ir Ho Hon Sang in response to queries from The Edge last Friday.

“The move will eventually lead to a greener Malaysia, which has been the aspiration of the government as well as the industry itself.”

Ho, who believes the building industry is ready for higher IBS implementations, notes that IBS usage increased after the pandemic as the country and industry grappled with challenges such as a severe shortage of foreign labour and strict governance and requirements on safety and environments.

“It is timely for all stakeholders including developers, contractors, suppliers, consultants and CIDB to assess the current situation and see how to improve the productivity of the building industry, such as by sharing best practices and to shift their mindset and embrace this change towards efficiency in the building industry,” he says.

In this respect, strong support and better incentives from the government will certainly expedite the move from conventional building methods to IBS, adds Ho.

For example, companies could carry out incentivised programmes to train their workers and equip them with the necessary skills, as the country lacks workers skilled in IBS.

While agreeing that higher IBS usage could put construction players’ margins under pressure in the short term, margins will improve in the long run, as the use of IBS leads to reduced labour costs and faster construction with quality assurance.

“It can also promote streamlined quality-control procedures, therefore reducing the likelihood of construction defects and facilitating proactive maintenance and repairs for the building,” says Ho.

Nevertheless, an executive with a large construction group says it will be hard to justify higher IBS use as long as Malaysia has an affinity for importing cheap migrant workers.

“You see high use of IBS only in countries where labour costs are high, such as in the US and Australia, and where construction jobs that require high wages are taken up by locals,” he says. 

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