Property developers forked out $24.9 million in extension fees last year for failing to dispose of all the residential units in their developments within the mandated period, reported The Straits Times.
While this is lower than the $29.98 million recorded in 2014, a recent report from Swiss bank Credit Suisse forecasts that extension charges could rise significantly this year.
Based on Qualifying Certificate (QC) rules, overseas developers are required to offload all the units in their private residential projects within two years of receiving the Temporary Occupation Permit (TOP). Otherwise, they must pay extension charges pro-rated to the percentage of remaining units.
The Additional Buyer’s Stamp Duty (ABSD) rules, implemented in December 2011, also stipulate that developers need to build, complete and sell all units within five years of buying the land. If there are any unsold units, they would be penalised with a 10 percent levy, which was subsequently increased to 15 percent for land plots purchased from 12 January 2013.
According to estimates from Credit Suisse, the total QC and ABSD charges could soar to $226 million in 2016 and $1.3 billion next year.
In particular, the jointly developed Nouvel 18 by CDL and Wing Tai could take the biggest hit this year, with charges amounting to $38.2 million if all of its 156 units remain unsold. This is followed by $15.2 million for China Sonangol’s TwentyOne Angullia Park near Orchard Road, and $14.6 million for Wing Tai’s Le Nouvel Ardmore at Ardmore Park.
However, experts feel that the figures reported by Credit Suisse could drop as they only cover unsold units as of 31 December 2015.
“The QC fees estimate is based on the assumption that developers do not sell any more units. That’s unlikely. As they continue to move units, the fees payable will drop.” Likewise for the ABSD charges, said Ku Swee Yong, CEO of Century 21 Singapore.
Wong Xian Yang, OrangeTee’s Senior Manager for Research and Consultancy, reckons that developers with more unsold units may pursue other means of selling their projects instead of just reducing prices. They may consider bulk sales, which is being done for iLiv@Grange.
Property firm Heeton Holdings has been seeking a buyer to purchase the 30-unit condominium. If it fails to secure a deal by October 2016, it will have to pay its second QC extension.