Developers have been forking out far more in extension fees this year than last for failing to sell all the units at their residential projects within a stipulated timeframe.
As at Oct 27, the Government had collected about $58.2 million in fees this year, up from just $24.9 million collected in the whole of last year, said the Singapore Land Authority (SLA) in response to a query from The Straits Times.
The extension fees relate to Qualifying Certificate (QC) rules applying to foreign developers – including Singapore developers listed here but with foreign shareholders.
Mr Lee Liat Yeang, senior partner at Dentons Rodyk & Davidson, said: “There were more properties hit with QC extensions in recent years, mainly due to the en bloc fever that we saw around 2007, which included fairly large sites with many units.”
Under the Residential Property Act, developers issued with a QC upon buying private residential land must finish building the project within five years of acquiring the site and sell all units within two years of obtaining a temporary occupation permit. Failing that, the developer pays extension charges pro-rated to the proportion of unsold units.
Analysts said some projects that were completed in 2014 and up for the first year of extension this year include China Sonangol’s TwentyOne Angullia Park, CapitaLand’s D’Leedon, Ardmore Three by Wheelock Properties and Wing Tai Holdings’ Le Nouvel Ardmore.
“Developers have adopted aggressive marketing campaigns, including attractive financial packages… and have been rewarded with robust sales since the beginning of the year,” noted Mr Joseph Tan, executive director for residential at CBRE.
For instance, CapitaLand began offering its deferred payment scheme known as “stay-then-pay” in June, while discounts were given by Wheelock Properties for units at Ardmore Three earlier this year.
However, some developers have taken alternative measures to avoid the QC penalties.
City Developments (CDL) recently struck a deal that saw the developer selling its stake in a company that owns luxury condo project Nouvel 18 to a group of Singaporean investors. CDL would otherwise have had to pay $38 million in QC extension fees for unsold units there.
Last month, property and hotel group Hiap Hoe Holdings and developer Heeton Holdings also offloaded stakes in firms that own projects hit by QC extension: [email protected] in the case of Heeton and WaterScape @Cavenagh for Hiap Hoe.
“I think developers were forced by circumstances… Had market conditions been good and not on prolonged soft landing, they are unlikely to take such measures to avoid paying QC,” noted R’ST Research director Ong Kah Seng.
In response to queries on whether QC rules are still relevant, the SLA said the objective of the QC regime is to prevent hoarding and speculation in restricted properties by foreign developers.
An SLA spokesman noted: “The QC holder in this case (CDL) has completed the development within the stipulated period and disposed of its interest in the completed units to a Singapore company, which is in line with the objectives of the Residential Property Act.”
Market watchers suggested tweaking QC rules by either extending the two-year sales period or allowing developers to lease unsold units while they try to sell them.
The Government could also be more flexible in assessing penalties payable – for instance, if the developer shows that it has “tried in good faith to sell the units”, said Mr Kenneth Szeto, real estate partner at Colin Ng & Partners.
Besides QC fees, developers also face the prospect of being hit by the additional buyer’s stamp duty (ABSD) requiring developers to build and sell all new units within five years of buying the site or pay a levy.
“One suggestion is to scrap ABSD altogether and subject all sites… and all developers to QC rules, which actually give developers more time to clear units,” noted Mr Lee.
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