Expanded tax scheme to benefit more construction facilities in Singapore from Jan 1, 2026

SINGAPORE – A scheme that gives tax allowances for the building of construction facilities that ensure efficient use of land – such as prefabrication hubs – will be expanded to cover more types of developments.

The enhanced Land Intensification Allowance scheme, which will take effect on Jan 1, 2026, will include multi-storey design for manufacturing and assembly facilities to further optimise land use, National Development Minister Desmond Lee announced on April 9.

Design for manufacturing and assembly is a way of prefabricating structures in an off-site facility before assembling them on-site in a Lego-like manner, saving time and manpower. This method is used in the construction of Housing Board flats.

Such facilities can be those for fitting prefabricated parts, storing precast components or producing other parts, such as mass-engineered timber and prefabricated mechanical, electrical and plumbing systems, Mr Lee said.

They cover a wider range of activities compared with integrated construction and prefabrication hubs, which focus on mainly prefabrication and are currently the only type of facility in the construction sector eligible for the scheme. Other sectors that qualify for it are manufacturing and logistics.

Under the initiative, companies will first receive a tax allowance of 25 per cent of their eligible construction costs, such as design and feasibility study fees. After that, they will receive 5 per cent each year until the total allowance reaches 100 per cent.

The expanded scheme will run till Dec 31, 2030, in an effort to drive greater adoption of design for manufacturing and assembly, the Building and Construction Authority (BCA) said on April 9.

Companies developing such new facilities and applying for planning permission on or after Jan 1, 2026, can apply for the scheme.

To qualify, new multi-storey design for manufacturing and assembly facilities must meet conditions such as a minimum gross plot ratio of 1.03, and at least 80 per cent of the gross floor area of the facility must be used by the building owner or its related users. A gross plot ratio of 1.03 means the development’s total floor area can be 1.03 times the land area.

The expanded scheme was announced at the 47th International Federation of Asian and Western Pacific Contractors’ Association (IFAWPCA) Convention at the Sands Expo and Convention Centre.

Mr Simon Loh, chief operating officer of Hong Leong Asia’s building materials group, said its integrated construction and prefabrication hub will receive about $16 million in potential tax savings under the scheme.

A joint venture with Malaysia’s Sunway Construction Group, the HL-Sunway Prefab Hub in Punggol Barat Lane spans 3.8ha and was completed in 2023. It cost more than $100 million to build, Mr Loh said. The facility, currently the largest in Singapore, is the only hub so far to have tapped the Land Intensification Allowance scheme.

Mr Loh said the building’s structure needed a higher load-bearing capacity due to the weighty precast components it handles.

“With that comes an increase in costs,” he said, adding that the scheme helped to defray part of the construction costs.

Mr Kenneth Loo, executive director and chief operating officer of Straits Construction, said the expanded scheme will be a push in the right direction for companies that are still undecided about constructing such facilities.

“These facilities are a very big investment and any help will definitely benefit the investors,” said Mr Loo, who is also president of IFAWPCA.

Straits Construction Group’s Greyform building, a 20,000 sq m integrated construction and prefabrication hub in Kaki Bukit that opened in 2017, cost $150 million to build. The company did not tap the scheme, as the initiative was expanded to such hubs only in 2017.

Speaking at the event, Mr Lee said Singapore faces tight resource constraints as it is a small island city-state, with no natural resources to rely on.

“For the construction industry, this means that we need to make the most of our limited resources to meet the construction needs of a growing nation,” he said.

This is done by shifting towards advanced construction methods and facilities, such as adopting design for manufacturing and assembly, robotics and automation, and transforming construction facilities.

For instance, Jurong Port in 2024 launched Singapore’s first integrated construction park, which houses key construction facilities such as storage areas and concrete batching plants. Such integrated facilities are an efficient use of land, help save transportation time and reduce the carbon footprint from truck trips across the island, Mr Lee said.

The Government will continue to encourage the development of construction facilities that use land efficiently, such as through the Land Intensification Allowance scheme, he added.

Mr Lee stressed the necessity of sustainability in construction, given Singapore’s land and resource constraints, as well as climate change and rising sea levels.

To that end, one of the goals in the Singapore Green Building Masterplan 2030 is to ensure that 80 per cent of new developments are Super Low Energy buildings from 2030, he said.

Such buildings achieve at least 60 per cent improvement in energy efficiency relative to 2005 levels.

For older buildings, the Mandatory Energy Improvement regime will kick in from the third quarter of 2025, he noted. It will require owners of energy-intensive buildings to carry out an energy audit and take action to reduce the energy consumption of their buildings.

Mr Lee said construction firms can tap the Energy Efficiency Grant, which provides eligible Singapore companies with financial support for up to 70 per cent of the cost of approved energy-efficient construction equipment.

To support firms in building long-term capabilities, the Built Environment Technology and Capability Grant provides firms with up to 70 per cent funding to develop new enterprise and manpower capabilities and adopt advanced technologies.

Correction note: An earlier version of this story quoted Mr Simon Loh of Hong Leong Asia’s building materials group saying the company received about $16 million in tax savings for its integrated construction and prefabrication hub. Hong Leong has clarified that the company will receive about $16 million in potential tax savings under the Land Intensification Allowance scheme.