Effective on March 6, the Ministry of National Development (MND) announced changes to the Additional Buyer’s Stamp Duty (ABSD) policy for licensed home developers.
Apart from the changes, developers working on challenging projects now have a six to twelve month ABSD remission schedule. This action seeks to inspire developers to engage in urban transformation projects, maximise land use by means of intensification or integration, revitalise historic estates or apply innovative building technologies.
Projects where the expansion would be applicable include en bloc redevelopment producing at least 700 units upon completion and if the redevelopment includes at least 1.5 times the number of houses of the current complex. Other initiatives include those involving complicated technical or instructional needs, such those linked with significant public transportation hubs.
Projects approved under the Strategic Development Incentive (SDI) scheme and projects seeking to reach greater productivity targets by means of new building technologies, methodologies or practices constitute two other categories.
Projects falling under any of the four categories are slated to get a six-month extension; projects meeting the requirements of more than one category will be given a one-year extension. These adjustments are supposed to apply to any piece of residential land acquired on or after March 6.
Currently, licensed housing developers buying residential redevelopment sites pay 5% ABSD upfront, which is non-remittable; another 35% ABSD, which is remittable once the developer completes and sells all the units in the project during the five-year period.
The most recent modifications follow those made in February last year, which provided a reduced clawback rate for residential projects with at least 90% of units sold.
Particularly for mega projects, “such extensions will give developers more flexibility and may help to somewhat reduce development risks since they have more time to sell units,” says PropNex Realty CEO Ismail Gafoor.
Senior Director of Data Analytics Lee Sze Teck of Huttons Asia notes the ABSD changes will “give a much-needed boost to the en bloc market, in particular, bigger en bloc projects.”
Although the suggested regulatory modification will probably be welcomed, OrangeTee Group chief researcher and strategist Christine Sun notes: “Developers may still encounter hurdles despite the deadline delay as there are other factors. For en bloc sales, for instance, the success rate will rely on buyers’ and sellers’ willingness to haggle over rates.”
Managing director of capital markets and investment sales at ERA, Tay Liam Hiap notes that it could be “an opportune time” for older projects with large land areas, such Braddell View and Pine Grove, to investigate en bloc possibilities.
These developments might produce about 2,000 new homes, which would take longer time to sell. “In such situations, the extension of six to 12 months may not be sufficient for developers to sell out their projects,” notes Tay.
Gafoor notes meantime that the legislative change may not “spark a revival in the en bloc market” and advises developers to remain wary given the “high cost of redevelopment, ample oncoming private housing supply, and potential policy risk”.
