Developers to get extended ABSD remission deadline for big en bloc rebuilds and complex ‘urban transformation’ projects

Property players welcome changes, but say more can be done to align rules with current market conditions

HOUSING developers will now have more leeway in their construction and sales timelines for “complex large-scale urban transformation developments”, with a critical sales deadline extended by six months to a year. “To better support developers in their transformation efforts, we will revise the Additional Buyer’s Stamp Duty, or ABSD, regime for those who undertake complex projects,” said Minister for National Development Desmond Lee in Parliament on Wednesday (Mar 5).

Such projects include large en bloc redevelopments that will have at least 700 units and at least 1.5 times the number of homes of the existing development; as well as rebuilds approved under the Strategic Development Incentive scheme.

Extensions will also be granted for smaller projects submitted through Corenet X, to encourage early adoption of the platform that streamlines how companies seek regulatory approvals. Currently, most housing developers have to start construction within two years, then complete and sell all units within five years, “to ensure timely injection of housing supply”, Lee said.

Developers are subject to ABSD of 40 per cent on the price of land purchased for residential development. They pay 5 per cent upfront. They have to fork out up to 35 per cent in an upfront remittable component that is clawed back with interest if they do not sell at least 90 per cent of units within the five years.

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

Currently, most housing developers have to start construction within two years, then complete and sell all units within five years, “to ensure timely injection of housing supply”, Lee said.

Developers are subject to ABSD of 40 per cent on the price of land purchased for residential development. They pay 5 per cent upfront. They have to fork out up to 35 per cent in an upfront remittable component that is clawed back with interest if they do not sell at least 90 per cent of units within the five years.

The Real Estate Developers’ Association of Singapore (Redas) said that the extended ABSD sales timeline provided some “much-needed flexibility” for developers taking on such large projects.

Integrated developments and rejuvenation projects, for instance, tend to be more complex and require longer execution duration, noted CapitaLand Development Singapore CEO Tan Yew Chin. “The extension enables us to better manage the timelines of such opportunities... and will also further strengthen our ability to deliver high-quality, sustainable homes.”

Redas suggested further changes to align the rules with current market conditions and encourage more urban transformation and rejuvenation. These include commencing the five-year deadline when the developer obtains all key approvals from the authorities to launch a project for sale, as well as waiving the ABSD for developers who have sold at least 95 per cent of all units.

The remaining 5 per cent of a project tends to be larger units which take a longer time to sell, “due to a limited buyer pool since the introduction of 60 per cent ABSD on foreign buyers”, Redas explained.

Knight Frank research head Leonard Tay proposed tweaking it further to include a graduated deadline based on the total number of units in a development. For example, projects with up to 700 units could be given a five-year deadline, and this could be extended by a year for every additional 200 units, capped at 10 years. “Thus, the time limit for disposal is weighed against a quantifiable and measurable physical scale for a more balanced treatment,” he said.

The move is particularly opportune for large and older condominiums eyeing collective sales such as Braddell View and Pine Grove, said Tay Liam Hiap, ERA managing director of capital markets and investment sales. Redevelopments on such large sites, which may yield some 2,000 new homes, would take more time to sell out. Gafoor added: “That said, we do not expect this announcement to spark a revival in the en bloc market – developers continue to be cautious given the high cost of redevelopment, ample oncoming private housing supply and potential policy risk.”

There are other factors in play, such as still-high asking prices for collective sales, the 60 per cent ABSD rate for foreign buyers in prime residential developments, and strong supply of state land that seems “reasonably priced”, said Savills Singapore executive director of research and consultancy Alan Cheong.

“The current state of the retail market (also) doesn’t seem too healthy... and the private sector will know how to maximise productivity, even without the incentive.”

Tricia Song, CBRE head of research, Singapore and South-east Asia, said: “At the very least, the longer timeframe should reduce anxiety among developers and their creditors or lenders.”

Redas added: “We hope that the government can continue fine-tuning measures that differentiate among the varying idiosyncratic challenges... to ensure continued sustainable and dynamic urban redevelopment.”

The changes to the ABSD regime will apply to developers undertaking complex projects that could “transform our urban environment at a large scale, optimise land…, rejuvenate older estates or adopt new technologies”, said the minister on Wednesday.