The Ministry of National Development (MND) has announced new changes to the Additional Buyer’s Stamp Duty (ABSD) regime for licensed housing developers, which will come into effect on March 6.
The revisions include an extension of the ABSD remission timeline for developers undertaking complex projects from six to 12 months. This move aims to encourage developers to take on urban transformation developments, optimize land usage through intensification or integration, revitalize older estates, or adopt new construction technologies.
Projects that qualify for the extended timeline include en bloc redevelopments that will yield at least 700 units upon completion, with 1.5 times the number of homes of the existing development. Other projects that qualify are those with complex technical or instructional requirements, such as those integrated with major public transport facilities.
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AdvertisementAdvertisementTwo other categories eligible for the extension 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 these four categories will be granted a six-month extension, with those meeting the criteria of more than one category receiving a one-year extension. These changes are expected to apply to all residential land acquired on or after March 6.
Currently, licensed housing developers purchasing residential redevelopment sites are subjected to a 5% ABSD upfront, which is non-remittable, and a 35% ABSD, which is remittable when the developer completes and sells all the units in the project within a five-year timeframe.
This latest revision comes after changes announced in February last year, offering 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 PropNex Realty CEO Ismail Gafoor.
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.”
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While this policy change will be welcomed by developers, 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, believes 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,” adds Tay.
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Meanwhile, Gafoor notes 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”.