“Listed property developers with a “substantial connection to Singapore” can now apply to be exempted from the qualifying certificate (QC) scheme.”Quote from The Straits Times
To fully understand the significance of this policy change, we have to first understand what is ‘Qualifying Certificate (QC)’ and which developer is affected by the QC scheme.
Under the policy of the Singapore Land Authority and the Ministry of Law, any foreign developer (including local public listed companies with one or more foreign stakeholders) who intends to purchase restricted property to construct apartments for sale must apply for the QC. These developers must complete the project within five years and sell out all their units within the next two years.
The objective behind this scheme is to prevent hoarding of homes by a foreign developer (foreign developers are not allowed to own lands). Practically most of the ‘big boys’ (major developers such as CDL, UOL, Guocoland, Frasers Property, etc) will have to apply for QC.
Currently, all developers who purchase a land via the Government Land Sale (GLS) or Enbloc have to fulfil the ABSD obligations. Foreign developers will have to fulfil an additional QC condition. I have illustrated the simplified terms and conditions below.
As of the new policy change back in 5 July 2018, developers who do not sell out their projects within 5 years will have to pay the ABSD of 25% based on the land price.
Take the former Pacific Mansion (currently known as The Avenir by Guocoland & Hong Leong Group) for example. Pacific Mansion was Enbloc at a whooping price tag of $980 million. If the developer does not sell out the project within five years, they would have to pay out a ABSD of $245 million to the Government.
As compared to the QC extension, the 8%-24% is based on the price of the remaining units. Hence the damage to developer is not as great. The only fear factor to this would be the threat of the forfeiture of the Banker’s Guarantee, and also that the Government would force a sale on the unsold units.
In my opinion, the impact of the QC exemption is not that great, since all the developers will try their best to sell their projects within five years of acquiring the land to avoid paying the 25% ABSD (this has since been extended by six months). The ABSD impact would be greater felt by developers.
Having said that, all these policy changes by the Government is very encouraging and perhaps even attractive. In the coming weeks, we would see more news of foreign property buyers wooed away from the likes of Hong Kong and China to invest in Singapore real estate. RET
Got a question? Contact Reuel Eugene Tay at +65 9833 6450 for a real estate discussion.
The Straits Times, 7 Feb 2020
Singapore Land Authority
The Straits Times, Pacific Mansion sold en bloc for $980m in second-highest deal, 20 Mar 2018