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Government relief measures for developers hit by construction disruptions

Government relief measures for developers hit by construction disruptions

Source: Business Times
Article Date: 09 Oct 2020
Author: Claudia Tan

Eligible property developers hit by disruptions to construction timelines due to Covid-19 can take up a set of additional temporary relief measures with immediate effect, the government said on Thursday night.

Eligible property developers hit by disruptions to construction timelines due to Covid-19 can take up a set of additional temporary relief measures with immediate effect, the government said on Thursday night.

Market watchers The Business Times spoke to said that these measures will cushion the impact of the slow resumption of work and the disruptive nature of the pandemic.

The additional relief measures are:

  • A further six-month extension of the project completion period (PCP) for residential, commercial and industrial development projects;
  • A further six-month extension for the completion of residential development projects in relation to the remission of the Additional Buyer's Stamp Duty (ABSD) for housing developers;
  • An extension of the PCP by up to six months for residential development projects under the Qualifying Certificate (QC) regime for foreign housing developers.

These measures do not affect the existing residential property market cooling measures in place to ensure that "private residential property prices are broadly consistent with economic fundamentals", said a joint statement from the ministries of National Development, Finance, Law and Trade and Industry.

Flash estimates for the third quarter of this year showed that the overall price index for private homes in Singapore edged up 0.8 per cent over the preceding three months; this followed a 0.3 per cent increase in Q2 this year. Analysts said such "gravity defying" figures reflect pent-up demand and record-low interest rates.

The ministries said on Thursday that while almost all construction projects have resumed, challenges remain: Workers have go into quarantine if they have come in close contact with a positive Covid-19 case. Adjustments have also had to be made to work-site practices to implement safe-distancing.

The ministries said: "These public health measures are necessary to prevent the industry from going into lockdown again, but they continue to affect construction timelines."

They added that contractors and developers have raised concerns regarding the additional costs and financial penalties incurred as a result of delays due to the Covid-19 pandemic.

With the additional support measures, the government expects developers to continue to similarly provide relief and support to their main contractors. The government will continue to monitor the impact of the pandemic on the construction industry, and on the property sector.

Additional relief measures to support the stakeholders will be implemented if needed. The government will ensure "no stakeholder bears an undue share of the burden imposed by the Covid-19", said the ministries.

The latest measures are on top of those announced on May 6.

All qualifying housing developers will continue to be subject to the prevailing ABSD regime, although with a further six-month extension of the remission condition timelines for commencement and completion of the residential development projects.

There is no further extension of the remission condition timeline for the sale of all housing units in the residential development project.

The conditions to be met to qualify for the additional measures are unchanged from the temporary relief measures announced on May 6, 2020.

This means for developers to qualify for the PCP extension, the land must have been awarded on or before June 1, 2020, or have been directly alienated or had their lease renewed by the Singapore Land Authority (SLA) on or before June 1, 2020; and the original timeline for completion of the residential development must expire on or after Feb 1, 2020.

Similarly, for developers to qualify for the ABSD extension, the land must have been bought on or before June 1, 2020; the original timeline for starting residential development must expire on or after Feb 1, 2020.

Under the QC regime, developers subject to the QC rules are to complete construction of all housing units in a residential development project within five years from the date of issue of the QC or the collective sale order, and dispose of all housing units within two years from the issue of temporary occupation permit or certificate of statutory completion.

Under the additional temporary relief measures, developers seeking to extend their completion deadline will be given a further waiver of extension charges of up to six months.

This will also apply to other SLA approvals requiring the completion of all units in the residential development. But there is no further waiver of extension charges to extend the existing deadline to sell all units in the residential development project.

To qualify, the QC or SLA approval requiring the completion of all units in the residential development must have been issued on or before June 1, 2020, with the original timeline for completion of the residential development expiring on or after Feb 1, 2020.

Said Lee Nai Jia, deputy director of the Institute of Real Estate and Urban Studies: "I think the measures will be helpful to the developers, as the construction firms are facing manpower constraints and uncertainty."

He added: "Separately, it should reduce the pressure on developers to lower prices to meet the specific deadlines."

Property analyst Ong Kah Seng said the "broad-based approach" that does not just allow residential projects to be eligible for an extension of project completion dates is useful, given that "all sectors are adversely hit by the Covid-19 pandemic". He added that it provides breathing room to buyers paying for their properties.

Christine Li, Cushman & Wakefield's head of business development services for Singapore and South-east Asia, said these are "pre-emptive measures to ensure that developers and contractors are not penalised unfairly due to circumstances beyond their control". She added that the extensions would also "mitigate downstream risks, which could destabilise the property market".

Head of research at ERA Realty, Nicholas Mak said the move could also be a precautionary measure in case the pandemic causes further lockdowns in worker dormitories, leading to more construction delays.

But the government's not extending the ABSD remission deadline for developers to sell all the units in the projects shows that it is "not cutting developers any more slack regarding the pace at which they must sell units in their projects", he said.

"Most developers should be able to meet their respective ABSD deadlines now, provided there aren't additional market shocks which would drastically slow down property sales."

Source: Business Times © Singapore Press Holdings Ltd. Permission required for reproduction.

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