Listed property developers with ‘substantial connection to Singapore’ can be exempted from qualifying certificate scheme

Under the current regime, a majority of developers that are deemed foreign companies need to complete their projects within five years of acquiring the site, and to sell all the units within two years of completion.PHOTO: ST FILE

SINGAPORE- Listed housing developers “with a substantial connection to Singapore” can apply to be exempted from the qualifying certificate (QC) scheme, which imposes certain conditions when they buy residential land for development.

The Ministry of Law announced on Thursday (Feb 6) that it will allow these developers to be treated as a Singapore company under the Residential Property Act (RPA) when they buy residential land for development, based on criteria such as having a track record in Singapore and a significantly Singaporean substantial shareholding interest.

“The changes are part of our regular policy review to better align the QC regime to the objectives of the RPA,” a MinLaw spokesman said.

The removal of QC for listed developers with a substantial connection to Singapore is a boost to them, analysts say.

“As a listed developer, they have to comply with both the QC and ABSD requirements,” Mr Lee Sze Teck, Huttons Asia director of research, noted, referring to the additional buyer’s stamp duty (ABSD).

“However, the more stringent ABSD means that all developers will have to sell their units within five years. The extra two years under the QC regime for public-listed developers to sell all their units have been rendered unnecessary with the introduction of ABSD.”

He added: “This is a timely review as this will help developers with their cash flow because they will not be required to place a security deposit with the Controller of Housing if they are exempted.”

Mr Liam Wee Sin, group chief executive of UOL Group, welcomed the move by MinLaw. He said: “It is also timely especially due to the outbreak of the coronavirus, where Singapore developers and the real estate industry are facing unprecedented and rapidly evolving challenges.”

Under the current regime, a majority of developers that are deemed foreign companies need to complete their projects within five years of acquiring the site, and to sell all the units within two years of completion.

If they fail to meet this deadline, the penalties are punitive. They incur extension charges at 8 per cent of the land purchase price, pro-rated on the number of unsold units in the first year; this goes up to 16 per cent in the second year and 24 per cent a year in the third and subsequent years.

Since the introduction of the QC regime, housing developers have paid about $200 million in extension charges.

As of Jan 6, there are 122 current QC holders who hold 136 QCs. Of the 122 QC holders, 37 are wholly owned by publicly listed entities.

Currently, only developers that have directors and shareholders who are Singaporeans or Singapore companies, and are incorporated in Singapore are considered a Singapore company. This means, however, that housing developers that have foreign shareholders, even if they are incorporated in Singapore, are not considered a Singapore company.

As such, these companies have to apply for a qualifying certificate when they buy residential land for development. Under the qualifying certificate regime, developers have to complete the development within five years and sell all units within two years of completion.

But the changes mean that listed developers with a substantial connection to Singapore can, with immediate effect, apply for exemption from the QC regime. These changes will be reflected in legislation later this year.

The application will be assessed on the following points:

– The company is incorporated in Singapore;

– Its primary listing is on the Singapore Exchange, and principal place of business is Singapore;

– The chairman and majority of the company’s board are Singapore citizens;

– The company has a significantly Singaporean substantial shareholding interest; and

– Has a track record in Singapore.

The changes kick in with immediate effect.

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