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Singapore listed developers can now apply for exemption from QC scheme

This article is more than 12 months old

Rule change by Ministry of Law and SLA means firms face less punitive penalties

Locally controlled developers may now get some reprieve from onerous conditions under one scheme when they buy residential land for development.

Listed property developers with a "substantial connection to Singapore" can now apply to be exempted from the qualifying certificate (QC) scheme.

This will offer a boost to some listed developers as it removes the stringent timelines and penalties under the QC scheme, analysts say.

The move, announced yesterday by the Ministry of Law (MinLaw) and Singapore Land Authority (SLA), was welcomed by real estate players facing an increasingly uncertain business environment compounded by the coronavirus outbreak.

Under the Residential Property Act (RPA), only developers with directors and shareholders who are Singaporeans or Singapore companies, and are incorporated here, are considered a Singapore company.

If they have just one foreign shareholder, they will not be considered as such .

These developers will therefore be subject to QC requirements, which include having to complete their projects within five years of acquiring the site and to sell all the units within two years of completion. This is to prevent land hoarding and speculation.

HARSH PENALTIES

If they fail to meet this deadline, the penalties are punitive.

They incur extension charges at 8 per cent of the land purchase price pro-rated on the number of unsold units in the first year.

This goes up to 16 per cent in the second year and 24 per cent in the third and subsequent years.

Since the introduction of the QC regime in 2011, developers have paid about $200 million in QC or extension charges.

With the rule change, locally controlled developers can now be treated as a Singapore company under the RPA.

This will be based on criteria such as having a track record in Singapore and a significantly Singaporean substantial shareholding interest.

"The changes are part of our regular policy review to better align the QC regime to the objectives of the RPA," said a MinLaw spokesman.

All housing developers will, however, continue to be subject to the additional buyer's stamp duty (ABSD) regime.

This requires firms to develop the land acquired and sell all units within the new project in five years from the date of purchase, among other conditions, in order to qualify for an upfront remission of ABSD based on the purchase price of the site.

Should a developer fail to do so, it will have to pay the 25 per cent ABSD with interest (or 30 per cent including an additional ABSD of 5 per cent that is non- remittable). This was raised from 15 per cent in July 2018.

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