The Ministry of National Development (MND) has recently announced revisions to the Additional Buyer’s Stamp Duty (ABSD) regime for licensed housing developers, which will come into effect on March 6th.
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Among the changes, the ABSD remission timeline for developers undertaking complex projects will now be extended from six to 12 months. This move aims to encourage developers to undertake urban transformation developments, optimize land use through intensification or integration, rejuvenate older estates, or adopt new construction technologies.
The extension will apply to various projects, including en bloc redevelopments that will yield at least 700 units upon completion and have 1.5 times the number of homes of the existing development. Other projects that fall under this category are those with complex technical or instructional requirements, such as projects integrated with major public transport facilities.
In addition, projects approved under the Strategic Development Incentive (SDI) scheme and those aiming to achieve higher productivity targets through the adoption of new construction technologies, methodologies, or practices will also receive a six-month extension. For projects that meet the criteria of more than one category, a one-year extension will be granted. These changes will apply to all residential land acquired on or after March 6.
Currently, licensed housing developers purchasing residential redevelopment sites are subjected to 5% upfront ABSD, which is non-remittable, and 35% ABSD, which is remittable upon completion and sale of all units within five years.
These revisions follow changes announced in February last year, which offered a lower clawback rate for residential developments with at least 90% of units sold.
PropNex Realty CEO Ismail Gafoor states that “such extensions will give developers more flexibility and may help mitigate development risks to some extent, as they have more time to sell units, particularly for larger projects.”
According to Lee Sze Teck, senior director of data analytics at Huttons Asia, the revisions to the ABSD regime will “give a much-needed boost to the en bloc market, especially for larger en bloc projects.”
Christine Sun, chief researcher and strategist at OrangeTee Group, expects that developers may still face challenges despite the deadline extension as there are other factors to consider, such as the willingness of buyers and sellers to negotiate prices.
In light of the new policy change, ERA managing director of capital markets and investment sales Tay Liam Hiap believes that it could be “an opportune time” for older projects, like Braddell View and Pine Grove, to explore en bloc opportunities. These projects could potentially yield around 2,000 new homes, which may take more time to sell. However, Tay acknowledges that the extension of six to 12 months may not be sufficient for developers to sell out their projects.
Despite the potential benefits of the policy change, Gafoor does not expect it to “spark a revival in the en bloc market” and maintains that developers will continue to be cautious, considering the high cost of redevelopment, ample supply of oncoming private housing, and potential policy risks.