The Ministry of National Development (MND) announced revisions to the Additional Buyer’s Stamp Duty (ABSD) regime for licensed housing developers that will take effect from Mar 6.
Further to the revisions, the ABSD remission timeline has been extended by six to twelve months for developers undertaking complex projects. This move aims to encourage developers to undertake urban transformation developments, optimise land use through intensification or integration, and rejuvenate older estates or adopt new construction technologies.
Projects where the extension would apply include en bloc redevelopments yielding at least 700 units upon completion; and if the redevelopment has at least 1.5 times the number of homes of the existing development. Other projects include those with complex technical or instructional requirements, such as projects integrated with major public transport facilities.
Two other categories included are projects approved under the Strategic Development Incentive (SDI) scheme and projects aiming to achieve higher productivity targets through the adoption of new construction technologies, methodologies or practices.
Projects that fall under any of the four categories are set to receive a six-month extension, while projects that meet the criteria of more than one category will be granted a one-year extension. These changes are expected to apply to all residential land acquired on or after Mar 6.
Licensed housing developers purchasing residential redevelopment sites are currently subjected to 5% ABSD upfront, which is non-remittable, and another 35% ABSD, which is remittable when the developer completes and sells all the units in the project within the five-year timeframe.
The latest revisions come on the back of changes announced in February last year, which offered a lower clawback rate for residential developments with at least 90% of units sold.
“Such extensions will give developers more flexibility and may help to mitigate development risks to some extent, as they have a bit more time to sell units, particularly for mega projects,” says Ismail Gafoor, CEO of PropNex Realty.
Lee Sze Teck, senior director of data analytics at Huttons Asia, says the ABSD revisions will “give a much-needed boost to the en bloc market, in particular, bigger en bloc projects.”
While the proposed policy change will likely be appreciated, Christine Sun, chief researcher and strategist at OrangeTee Group, adds: “Developers may still face challenges despite the deadline extension as there are other considerations. For example, the success rate of en bloc sales will depend on the willingness of buyers and sellers to negotiate prices.”
Tay Liam Hiap, managing director of capital markets and investment sales at ERA, reckons that it could be “an opportune time” for older projects, such as Braddell View and Pine Grove, which are projects with expansive land areas, to explore en bloc opportunities.
These projects may yield some 2,000 new homes, which could take more time to sell. “In such cases, the extension of six to 12 months may not be sufficient for developers to sell out their projects,” notes Tay.
Gafoor adds that the policy change may not “spark a revival in the en bloc market” and expects developers to continue to be cautious due to the “high cost of redevelopment, ample oncoming private housing supply, and potential policy risk”.
