Extended ABSD remission deadline for big, complex projects timely; developers want more fine-tuning

Developers who undertake large-scale complex projects, including larger collective sale redevelopments, will likely have more wiggle room after a critical sales deadline was extended by six months or a year.

While analysts say the policy change is timely, the Real Estate Developers’ Association of Singapore (Redas) called for more fine-turning to the Additional Buyer’s Stamp Duty (ABSD) regime.

Minister for National Development Desmond Lee said in Parliament on March 5 that the ABSD remission timeline will be extended by six months or a year for developers undertaking complex projects that could “transform our urban environment at a large scale, optimise land… rejuvenate older estates or adopt new technologies”.

Developers are subject to ABSD of 40 per cent on the price of land purchased for residential development, but can obtain a remission of 35 per cent if they sell all the units in the development within five years of their buying the land.

Extensions will be granted to projects approved under the Strategic Development Incentive scheme, as well as projects with complex technical or infrastructure requirements, including sites integrated with MRT stations and bus interchanges, and those that seek to achieve higher productivity targets via adoption of new construction technologies.

Extensions will also be granted for eligible smaller projects submitted through Corenet X, to encourage adoption of this platform that the authorities launched, which streamlines how companies seek regulatory approvals.

Projects that fall within any of these categories will be given an extension of six months, while those that fall within more than one category will be given an extension of a year. The extension will apply to residential sites acquired on or after March 6.

Ms Christine Sun, chief researcher and strategist at property firm OrangeTee Group, believes that the policy change is timely, as there could be more projects with complex technical or infrastructure requirements near MRT stations including integrated developments at Jurong and Hougang, and even new growth areas like Mount Pleasant, Turf City, and Turf Club.

Analysts say the extension is “fairer” as larger and more complex projects should not be held to the same deadlines as smaller ones.

Currently, most housing developers are required to commence construction within two years, as well as complete and sell all units within five years, “to ensure timely injection of housing supply”, Mr Lee said. 

If they fail to do so, the upfront remittable ABSD component will be clawed back with interest.

But Huttons Asia chief executive Mark Yip said this was “a blanket policy that disregards the size and complexity of projects”.

“A more complex project like an integrated mixed-use development may take more than a year to secure the approvals for sale,” he noted.

While Mr Yip believes the extension of the ABSD remission timeline by six months or one year is reasonable, he argued for a “two-year extension especially for projects with more than 500 units, and in prime district and Central Business District”.

This is because the current 60 per cent ABSD on foreigners buying a residential property in Singapore has dampened demand for private homes in these areas, he said.

Meanwhile, Redas suggested that the authorities consider waiving ABSD for developers that have sold at least 95 per cent of units, instead of 100 per cent.

This is because the remaining 5 per cent tends to be larger units that take a longer time to sell due to the hefty ABSD on foreign buyers, Redas said.

The extension of the ABSD remission timeline is the second revision to the regime for developers.

This comes after the Government announced in Budget 2024 that from Feb 16, 2024, projects with at least 90 per cent of units sold within the five-year sale timeline will be subject to a lower ABSD remission clawback rate.

Previously, developers were required to sell 100 per cent of units within the timeline.

Meanwhile, extensions will be also given to complex projects including collective sale redevelopments that will have at least 700 units and the number of units upon redevelopment is at least 1½ times the number of homes of the existing development.

While this could spark hope among owners of some older residential developments who are trying for a sale en bloc, analysts say this may not necessarily trigger a revival of the collective sale market.

Huttons noted that since the July 2018 cooling measures, there have been only three collective sale projects – Chuan Park, The Continuum and Thomson View – developed into projects with more than 700 units.

Mr Nicholas Mak, chief research officer at Mogul.sg, said the latest six- or 12-month extension may not be enough to incentivise developers to acquire the mega older projects such as Pine Grove, which could yield more than 2,000 new homes, as this may not be long enough for them to build and finish selling the future project.

In addition, this extension may not increase the collective sale potential of high-end residential projects, many of which have a big proportion of units owned by foreigners, he added.

“They are reluctant to sell their existing properties in Singapore because they will face a 60 per cent ABSD if they buy a replacement property,” he said.

PropNex chief executive Ismail Gafoor believes that developers may have more confidence bidding for large residential sites or evaluating collective sale opportunities. But they will continue to be “cautious given the high cost of redevelopment, ample oncoming private housing supply, and potential policy risk”.

“Ultimately, all land acquisition moves must make business and financial sense,” he said.

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.

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