Monday, November 5, 2012

Government pledges enough land for needs of industry

It will also keep up efforts to prevent misuse that could drive up prices
Nov 05, 2012

There will be enough land released to satisfy the needs of industrialists, the Ministry of Trade and Industry (MTI) pledged yesterday.

The Government also said it will maintain efforts to ensure that the space is not misused by non-industrial users, which could be driving up prices and rents.

Prices of industrial land have surged 27 per cent in the first nine months of the year, a situation that has led to concerns that small and medium-sized enterprises (SMEs) are being hit hard by the rising costs.

Acknowledging that prices have continued to rise, an MTI spokesman said "the Government will continue to release sufficient land to meet the needs of industrialists".

But while prices are up, the pace of rising rents is moderating. This bodes well for the Government's efforts at cooling the red-hot sector.

Rents rose by 1.2 per cent in the three months to September, compared with the figure in the previous quarter. This was slower than the 2.8 per cent rise in the second quarter.

This slower growth reflects the increase in supply of industrial land through the industrial government land sales programme since 2010, said the spokesman.

The Government has rolled out a bumper supply of industrial land with a total of 47.69ha this year - about 1.4 times last year's total - in areas such as Tuas, Ubi, Serangoon and Woodlands.

"We will also continue with our enforcement efforts to ensure that industrial space is not misused by non-industrial users, which may also have contributed to the increase in industrial prices and rentals," the spokesman added.

The once unglamorous market of industrial real estate has caught fire as retail investors enter it after a slew of residential cooling measures made that sector less appealing. But while it has become a haven for investors, SMEs are being squeezed by the higher rentals.

Mr Kunasegar Raman, managing director of electronics firm Dynamics Circuit, said his rent was raised by 15 per cent last year when he renewed his lease.

"Apart from what the Government is doing now, it would be good if it can also offer some form of tax incentive to cushion this increase," he added.

There have been some government attempts to rein in prices.

The latest was in July, when lease terms for industrial sites under the government land sales programme to be sold till December were capped at 30 years.

More sites of smaller size and shorter tenure will continue to be released to meet the needs of industrialists who might prefer to build their own facilities rather than rent.

The MTI spokesman also said it will consider developing separate indexes for different industrial property segments. This was in response to a suggestion put forward by a property expert, who said a separate index should be compiled for each industrial property segment - freehold as well as 30-, 60- and 99-year leases.

This would give the market a better idea of price movements and raise the level of transparency in the market.

"The Government will study the availability of data and explore this possibility moving forward," the MTI spokesman said.

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