Long-time HDB shop tenants get breather

They have up to 2019 to decide on transfer of business premises

Furniture shop owner Chen Foon Kee is one of 7,100 long-time HDB shop tenants who will benefit from the longer grace period.
Furniture shop owner Chen Foon Kee is one of 7,100 long-time HDB shop tenants who will benefit from the longer grace period.ST PHOTO: MARK CHEONG

A recent rule to curb speculation in the Housing Board commercial and industrial rental market has been effective so far, and the authorities are extending a concession to long-time tenants.

Last October, the HDB banned new tenants from transferring such rental premises to others for a cash premium, known as an assignment fee.

Business owners "assign" their properties to others because they are not doing well, or can profit from the transfer of a popular place.

Since the rule last October, average transfer fees have fallen 33 per cent for HDB commercial property and 42 per cent for industrial property, said National Development Minister Khaw Boon Wan yesterday.

ERA Realty key executive officer Eugene Lim said: "This shows that the policy has been successful in doing its job of curbing rising operating costs and speculation in HDB rental commercial and industrial properties."

While stepping in to curb speculation, which may ultimately lead to higher costs for consumers, HDB had also given old-timer tenants a grace period of three years, up to 2016, to transfer their shops or industrial property.

It is now extending this by three years. This means tenants who qualify now have until 2019 to decide.

The concession applies to existing commercial and industrial tenants who have been renting from HDB for at least 15 years as of last Oct 16.

There are about 7,100 of them, three in four of whom are aged 55 and above.

They make up 40 per cent of HDB's commercial and industrial tenants.

The decision was made in response to feedback given to HDB over the last few months from various groups of tenants, Mr Khaw wrote on his blog.

"Some tenants who have been operating out of the same premises for many years asked HDB for a longer grace period, to give them more time to make business adjustments," he said.

A significant proportion of them will in fact be retiring in a few years' time, or would be near retirement then, he added.

"I hope the extended grace period would better help them make the necessary business adjustments to dovetail with their retirement plans. This concession is a good way to recognise their many years of serving the local community," he said.

ERA Realty's Mr Lim said that previously, commercial space assignment fees averaged around $150,000, with those for clean and light activities about $40,000 to $50,000.

The fees for food factories and car workshops can be about $100,000 to $200,000.

Old-timer tenants welcome the extension, which they say gives them more time to decide on their businesses.

"To me, three years was too short because my health and spirit are still very good now. I still can keep running my shop," said furniture shop owner Chen Foon Kee, 66. He has been running his Bukit Merah Lane business since 1979.

The news was also welcomed by Federation of Merchants' Associations Singapore president Yeo Hiang Meng, who said it gave existing tenants more time to look for new tenants.

"The original idea of assignment fees was good, except certain groups of people used it as a way to speculate and that pushed up the rentals," said Mr Yeo.

"Now, new tenants have longer-term plans," he added.