Builders have been branching out much more in extension fees, compared to last year; for their shortcoming on their ability to sell all their apartments during a fixed time frame.
On, October 27, reports taken from the Singapore Land Authority (SLA) showed that local government has collected $58.2 million in extension fees this year. Which in comparison to last years $24.9 million, is more than double.
These extension fees are related to QC (Qualification Certificate), whose rules apply to both foreign and local developers.
During an interview a Senior partner from Dentons Rodyk & Davidson, Mr Lee Liat Yeang, said: “there has been a rise in QC extension fees for the past few years now, which is mainly about large sites, with larger number of units. The same obsession was seen in 2007.”
According to Singapore’s Residential Property Act, if developers are presented with a QC when buying residential property, are required to finish the entire project within 5 years. Furthermore, they are required to fill all the units in two years after they have obtained their temporary occupation permit. If developers fail in either one of those, they are required to pay the QC fees, which depends on the number of unsold units.
Studies showed that projects that hit completion in 2014, and are up for QC extension fees this year include CapitaLand’s D’Leedon, TwentyOne Anguillia Park, Ardmore three, and Wing Tai Holdings.
Year Amount in USD
2013 – $17,810,860
2014 – $29,976,300
2015 – $24,906,160
2016 (up till 27th October) – $58,153,126.81
Mr Joseph tan, executive director for residential CBRE, in an interview said; that developers are picking out the tricks from books, from attractive packages, to heavy marketing campaigns.
We saw CapitaLand offering payment schemes that said “Stay then pay”, while others are giving our discounts. Furthermore, some developers have taken matters differently. Just to avoid paying QC fees, developers sold their stakes in companies to local investors, so they can save themselves from from an $38 million payout. Just last month, we saw Hiap How Holdings getting rid of their stakes in projects under QC extensions.
Ong Kah Seng, a research director in an interview said; developers were forced to sell their stakes due to circumstances, as if the market conditions were good companies would have reacted differently. As these companies are not the kind to sell just to avoid fees.
When asked about queries regarding QC extension fees, by SLA, they made it clear that QC is in place to prevent foreign developers from hoarding restricted properties. Which is why they are required to pay a fee after the allocated time runs out.
Many market watchers have suggested that QC should extend their two year policy, or allow the company to lease the units while the work on selling them. Furthermore, the government should be more flexible towards developers. A show of good faith should be appreciated by the government, when assessing penalties. If the developers have used all means necessary and were still unable to sell all units, the government should grant them some discount on the due QC penalty.
QC fees are not the only penalty developers face, additional buyer stamp duty (ABSD) states that if the developer is unable to sell all units under 5 years, they will have to pay a fine. Mr Lee, added that the government should get rid of ABSD and everyone should follow QC rules. This way the developer will be able to have a clearer field, which means they will have more time to sell out all new units. These changes can change the market of foreign investors, and developers looking to invest in Singapore.
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