Listed Singapore developers can get exemption from QC scheme

Rule change exempts them from stringent timelines and penalties

With the rule change, locally controlled developers can now be treated as Singapore companies under the Residential Property Act when they acquire residential land for development. This would be based on criteria such as having a track record in Sing
With the rule change, locally controlled developers can now be treated as Singapore companies under the Residential Property Act when they acquire residential land for development. ST PHOTO: SEAH KWANG PENG

Some listed developers in Singapore may now get some reprieve from onerous conditions currently imposed on foreign developers when they buy residential land for development following a rule change yesterday.

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 eligible listed developers as they will be exempt from stringent timelines and penalties under the QC scheme, analysts say.

The move, announced yesterday by the Ministry of Law (MinLaw) and the Singapore Land Authority, is welcomed by real estate players facing challenging market conditions and 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 Singapore companies.

If they have just one foreign shareholder, they will not be considered Singapore companies. 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.

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 a year in the third and subsequent years.

Since the introduction of the QC extension charges 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 Singapore companies under the RPA when they acquire residential land for development. This would 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 has been raised from 15 per cent since July 2018.

Nevertheless, allowing exemptions from the QC regime will be a relief for developers that are concerned about clearing land inventory and potentially having to pay extension charges, said Ms Tricia Song, head of research for Singapore, Colliers International.

City Developments (CDL) welcomed the change, pointing out that the QC regime puts listed developers like itself in a "disadvantaged position, as they are subjected to double penalties of QC and ABSD".

"The group will study details of the changes and make the necessary applications for eligible development projects," a spokesman said, adding that CDL's joint-venture residential project, the 592-unit Amber Park in the East Coast launched in May last year, may benefit from this change.

Ms Song believes that land bid prices for larger sites may improve as developers may not need to make provision for both ABSD and QC penalties. The change could also help to attract listings of developers on the Singapore Exchange or encourage developers that have previously delisted due to QC rules to seek a new listing, she added.

Mr Liam Wee Sin, group chief executive of UOL Group, also welcomed the change, saying it was "timely due to the outbreak of the coronavirus, (and when) Singapore developers and the real estate industry are facing unprecedented and rapidly evolving challenges".

Meanwhile, the authorities reiterated yesterday that the Government will not be making changes to existing property market cooling measures, which were put in place to keep private residential price increases in line with economic fundamentals.


About the scheme

The qualifying certificate (QC) regime requires developers that are deemed foreign companies to complete their developments within five years and dispose of all units within two years of completion.

This is to prevent land hoarding and ensure that housing developers build and sell the residential land in a timely manner.

Publicly listed housing developers, even if they are essentially Singaporean, will not be considered Singapore companies as long as they have just one foreign shareholder. As such, they will have to apply for the QC.

Yesterday, the authorities announced a rule change allowing listed developers with a substantial connection to Singapore to apply for exemption from the QC regime. Applications may be submitted to the Controller of Residential Property and will be assessed on the following points:

• The company is incorporated in Singapore;

• Its primary listing is on the Singapore Exchange, and its principal place of business is Singapore;

• The chairman and the majority of the company's board are Singapore citizens;

• The company has a significantly Singaporean substantial shareholding interest; and

• Has a track record in Singapore.

These changes take immediate effect and will be reflected in legislation later this year.

A version of this article appeared in the print edition of The Straits Times on February 07, 2020, with the headline 'Listed S'pore developers can get exemption from QC scheme'. Subscribe