Govt changes rule to let developers have full project completion period
Dec 04, 2012
The Government has moved to maximise the timeframe in which property developers are required to complete residential projects on collective sale sites.
The change has been welcomed by some developers as fair but others are already calling for greater clarity as they fear it could have unintended consequences.
Developers have long called for greater flexibility over the rules applying to completion dates for residential projects.
They worry strict rules force them to complete projects when market conditions are not necessarily favourable.
In the latest change detailed in a circular to industry players by the Singapore Land Authority (SLA), the project completion period (PCP) for a collective sale site will now start from the date the collective sale order is granted.
Previously, the starting date was when the developer's qualifying certificate (QC) was issued.
The change applies to QCs issued on or after July 1 this year. It is to enable the developer to have the full PCP to complete the project, the circular obtained by The Straits Times said.
It was sent to the Real Estate Developers' Association of Singapore (Redas), law firms and other organisations yesterday.
Separately, the Ministry of Finance (MOF) also told The Straits Times that it will adopt the same approach for the start date of the additional buyer's stamp duty (ABSD).
Under the Residential Property Act, housing developers whose shareholders and directors are not all Singaporeans are required to get a QC to buy residential property for development.
This is imposed to control foreign ownership of land here.
The rule gives developers up to five years to build the project and requires them to sell all the units within two years of obtaining the temporary occupation permit.
They are not allowed to rent out unsold units.
To ensure compliance, a developer has to put up a banker's guarantee of 10 per cent of the purchase price of the property, which may be forfeited if the developer fails to fulfil the QC's conditions.
Some developers The Straits Times spoke with said the change was welcome as it offered them more flexibility.
It could also protect them against the risk of a lengthy en-bloc battle eating into their five-year development timeframe, experts add.
Mr Teo Hong Lim, executive chairman of Roxy-Pacific Holdings, said that the changes were fair as a developer cannot be sure that he can acquire a collective sale site until an order by the Land Titles (Strata) Act is issued.
"It is a positive move because it gives the buyer a longer period to manage the land bank... It is the most fair compared to having the PCP start on when the QC was issued or the sales contract date," he added.
But some lawyers point out that some developers might obtain their QC after the collective sale order has been made.
Mr Lee Liat Yeang, a partner at Rodyk & Davidson's Real Estate Practice Group, said that this scenario was "quite common" and would mean that the developer has less time to complete its project instead.
"Still, this change shows that the Government is willing to listen to feedback from developers and to consider special circumstances.
"Maybe the guidelines can be changed to state that the PCP will start either from when the QC is issued or when the order is granted, whichever is later, instead," he added.
Yesterday, SLA also announced that it would grant PCP extensions for certain projects.
The circular said that in 2008, the Government had called on developers to defer the redevelopment of collective sale sites.
Where a developer had responded to this call, and rented out the property instead to alleviate the rental housing supply crunch back then, an extension might be given, it said.
The Land Dealings (Approval) Unit will grant a one-time extension of the PCP upon application, commensurate with the period of tenancy, without charge.
Applicants, however, will have to submit documentary proof for consideration, the circular by SLA's controller of housing Vincent Hoong noted.
City Developments said that it will be applying for an extension for its Lucky Tower site in Grange Road.
The firm added that it welcomed the announcement as it had heeded the Government's call then to defer the redevelopment of the property.
The MOF added that for collective sale sites purchased by a developer from July 1 this year, the start date of the five-year period for the ABSD will begin from the date of the collective sale order.
The ABSD requires developers to build and sell all their residential units in five years or pay a stamp duty of 10 per cent.
This applies to land parcels bought on or after Dec 8 last year.
Law firm Rodyk & Davidson partner Norman Ho said that while industry players have not been officially informed of this change yet, it will be a welcome one as the five-year period had previously started from when the sales and purchase agreement was inked.
As it took six months to a year before the sale order was issued, this had led to developers' appetite for collective sale sites being affected over the past year.
Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
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