Tuesday, June 12, 2012

Industrial land tenure halved to 30 years

Business Times: Tue, Jun 12
[SINGAPORE] The Ministry of Trade and Industry (MTI) is halving the maximum tenure for industrial sites under its land sales programme to 30 years - to make industrial property more affordable to genuine industrialists.

The tenure reduction applies to nine larger plots in the slate of 19 land parcels in the second-half 2012 Industrial Government Land Sales Programme announced yesterday as well as to six sites in the first-half slate that have yet to be launched.

Halving the maximum 60-year tenure will also enhance the government's flexibility for land redevelopment since the sites will revert sooner to the state.

SLP International executive director Tricia Teo said: "The move will make developers more prudent in their land bids because when it comes to end-property sales, 30-year leasehold properties are very vulnerable to market changes. During Lehman's collapse in 2008, only one or two banks were providing financing for such properties."

Colliers International director Chia Siew Chuin said: "This is a clear attempt to keep industrial property prices in check, amid concerns about prices rising beyond the reach of manufacturers, especially SMEs. By reducing the land tenure, MTI hopes to keep prices within reach of genuine industrialists. Casual investors unfamiliar with industrial property are likely to have less preference for shorter tenure."

The 30-year tenure applies to the larger sites, including those in relatively choice locations such as Ubi Avenue 4, Serangoon North Avenue 5, Sunview Road and Buroh Street in the Jurong area, and Woodlands Avenue 10, which would be targeted at developers since they're unlikely to be within reach of industrialists, notes Colliers.

To cater to industrialists who prefer to build their own customised premises, MTI will continue its H1 strategy of releasing smallish plots in Tuas South on short tenure.However, MTI has lengthened slightly the land tenure - from 19 years previously to 22 years - for the 10 small sites in Tuas South on the H1 2012 reserve-list slate that are being moved to H2's confirmed list. Property consultants suggest that this could be in response to feedback on difficulty in securing bank financing for sites below 20 years.

A Knight Frank spokesman said: "The government is now addressing the requirements of the end-user market. JTC is no longer building standard landed factories and the small plots on short tenure MTI is offering in Tuas will cater to industrialists keen on building such premises for their own use."

For H2 2012, MTI will offer a total of 23.72 hectares of industrial land across 16 confirmed-list sites and three reserve-list plots - close to the 23.97 hectares slated for H1. This means that the government is releasing 47.69 ha of land for this year's Industrial Government Land Sales Programmes - 1.4 times that of last year.

"The government will continue . . . to release sufficient land through the Industrial GLS Programme, to moderate industrial land prices and provide adequate space for industrialists," MTI said yesterday.

Confirmed list sites are launched as scheduled regardless of demand, while reserve list sites are released only if there is demand.

Strata subdivision of developments on the Serangoon North Avenue 5 and Ubi Avenue 4 plots is not allowed for 10 years after the projects receive Temporary Occupation Permit. Thereafter, the minimum strata size is set at 150 square metres gross floor area. The same minimum applies to the other sites that do not have the initial 10-year subdivision ban.

The six H1 land parcels that have yet to be sold whose tenures will be halved to 30 years include a 2.2-hectare confirmed-list site at Mandai Link that was scheduled for launch in January but was delayed as more time was needed for land preparation and will now be released this month. The plot's tenure is down from 58 years previously.

Three other H1 confirmed-list sites - Plot 3 at Tampines Industrial Crescent, a site at Bukit Batok Street 23 and another at Yishun Avenue 9 (parcel 5) - will be rolled out as scheduled this month, but with tenures halved from 60 years.

Two sites on the H1 reserve list - at Yishun Avenue 9 (parcel 6) and Tai Seng Street - too will see their respective tenures cut from 60 years and 58 years to 30 years when they are rolled over to the H2 reserve list.

The only other reserve site for H2 is a 4.03 ha plot at Woodlands Avenue 12 (parcel 4). In all, the three reserve plots add up to nearly 6.4 hectares, while the 16 confirmed list plot total 17.4 ha.

MTI also highlighted that an annual supply of 500,000 sq m of multiple-user factory space - including strata industrial units - is expected to be completed in 2012 and 2013. "This is about three times the average annual supply for the past five years and will ensure that there is sufficient supply of affordable factory space for industrialists."...
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Martin Koh/ Sherry Tang
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