Category Archives: Developers

URA revises rules for property developers

In a bid to promote accountability and protect the interests of home buyers, the Urban Redevelopment Authority (URA) recently revised the criteria for issuing sales licences for home builders, reported The Straits Times.

First, the minimum paid-up capital or deposit for those applying for a licence, has been raised from $1 million to between $1 million and $4 million, depending on the project’s size.

Those intending to build and sell a housing project with up to 50 units must have a paid-up capital of $1 million, $2 million for developments with 51 to 200 units, $3 million for projects with 201 to 400 units, and $4 million for larger developments.

Second, developers can no longer cite non-residential projects in the track record, to be submitted as part of their sales licence application, as commercial and industrial projects differ from residential developments.

According to Nicholas Mak, Head of Research and Consultancy at SLP International, this would prevent some smaller players in the industrial sector from venturing into the housing market.

Third, the number of units that a developer can be allowed to build will depend on the size of the completed developments specified in the track record.

If a company has completed fewer than 10 units, it can only obtain a sales licence for a new housing project with less than 50 units. Those who have constructed 11 to 50 units are permitted to build fewer than 200 units. Those with 51 to 100 units under their portfolio are eligible for developments with less than 400 units, while firms that have built over 100 units have no restrictions.

This new rule will safeguard buyers from developers who want to launch many units, but don’t necessarily have the experience, said Augustine Tan, President of the Real Estate Developers’ Association of Singapore (REDAS).

Finally, for developers applying for a sales licence based on the track record of their companies, at least one of its directors involved in the previous project must remain in his or her position.

“Developers can always disappear from Singapore after taking profit… But if they have a couple of people who are qualified directors, these people would hopefully behave more responsibly and can be held accountable,” noted Ku Swee Yong, Chief Executive, Century 21.

The changes will apply to all new licence applications received from 1 April 2016 onwards.

No respite from mounting extension charges for developers

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.