[UPDATE] Six-month extension for developers’ project completion, couples selling their existing homes
By Cecilia Chow
/ EdgeProp Singapore |
SINGAPORE (EDGEPROP) - The government has announced temporary relief measures for property developers and individuals affected by disruptions to construction timelines and sales of housing units as a result of the extension of the “circuit breaker” to June 1 amid the Covid-19 pandemic.
“The temporary relief measures are not considered a relaxation of the property cooling measures, but rather to give some breathing space to anxious developers and individuals who are affected by the extended circuit breaker period,” says Ismail Gafoor, CEO of PropNex.
Announced on May 6, the temporary relief measures which came into immediate effect include a six-month extension to project completion period (PCP) of residential, commercial and industrial developments.
Temporary relief measures have been passed to support those affected by disruptions to construction timelines, operations at sales galleries, and home viewings. (Picture: Samuel Isaac Chua/The Edge Singapore)
Property developers have also been granted a six-month extension on the commencement and completion period of residential developments, as well as sale of housing units in residential projects in connection with the remission of the additional buyer’s stamp duty (ABSD).
Foreign property developers have been given up to six months on the extension of the PCP and disposal period for their residential projects under the Qualifying Certificate (QC) regime. However, conditions apply, such as the original timeline of the PCP, and the date that the land was purchased in order to qualify for the extensions.
“Construction timelines in particular have been greatly impacted by the circuit breaker measures,” according to Karamjit Singh, CEO of Showsuite Consultancy. “The recent spike in the spread of the virus among the migrant worker population is also a contributing factor.”
On top of the construction bottlenecks, the completion of residential projects has also been delayed by disruptions in the supply chain, says Nicholas Mak, head of research & consultancy at ERA Realty. “The temporary relief measures are mainly to neutralise the effects of the circuit breaker,” he adds
The relief measures will certainly give some reprieve to developers with large residential projects. (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Reprieve for developers with large residential projects
The relief measures will certainly give some reprieve to developers with large residential projects who are already finding it a challenge to meet the five-year ABSD remission deadline, says Christine Li, head of research for Singapore & Southeast Asia, Cushman & Wakefield (C&W). The impact on developments with ABSD and PCP deadlines in 2020 is quite minimal, with only over 30 units remaining unsold across five projects. Next year, only about 15 projects will have about 400 unsold units, according to Li.
Developers’ new home sales have already been severely impacted by the circuit breaker. Even after the circuit breaker is lifted, she expects safe-distancing measures at project sales galleries to continue affecting activities.
PropNex’s Gafoor agrees. “It will take some time before businesses can resume and things normalise due to the global economic slowdown and safe-distancing measures that could still be in place,” he says.
Lee Liat Yeang, senior partner of law firm Dentons Rodyk & Davidson, is of the view that the six-month extension for property developers’ PCP, as well as commencement and completion of residential projects with regard to ABSD remission, is insufficient. “Developers have been urged to give more time to contractors to complete their developments,” he reasons. “But they have a contractual obligation to their existing buyers to deliver their properties within a stipulated time period, based on the sale and purchase agreements (SPAs).”
Source: Rajah & Tann Singapore
Developers may have built in a time buffer in their committed delivery dates to buyers. But any further extension in the circuit breaker measures could erode that buffer, putting them in a tight situation, adds Dentons' Lee.
Under the Housing Developers (Control & Licensing) Act (HDA) and the Sale of Commercial Properties Act (SCPA), property developers who fail to deliver vacant possession of sold units by the date stipulated in the SPA, “are liable to pay liquidated damages to purchasers — at the prescribed rate of 10% per annum (calculated on a daily basis) — on the total sum of all the instalments paid by the purchaser towards the purchase price of the unit”, comments Norman Ho, senior partner of corporate real estate at law firm Rajah & Tann Singapore.
A developer’s contract with its main contractor would typically contain a force majeure provision (a clause included in contracts to remove liability for natural and unavoidable catastrophes), explains Ho. However, the SPA does not contain such a clause to allow either party to suspend performance of contractual obligations, for example, the developer to deliver vacant possession of a unit to the buyer, he adds.
“Perhaps it’s time for the relevant agencies and authorities to consider introducing a force majeure provision to afford some level of protection to property developers who may find themselves caught between a rock and a hard place when faced with looming deadlines for delivery of vacant possession of units and contractors who are asserting or claiming triggering of force majeure clauses,” Ho comments.
With the extension, they now have 12 months to sell their first property (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Married couples get six-month extension to sell existing homes
Singaporean married couples will also get some relief: a six-month extension for the sale of the first residential property in relation to ABSD remission for the purchase of their second property. To qualify for the extension, the couple’s second property must be jointly purchased on or before June 1, 2020, and the original timeline for the sale of the first residential property must expire on or after Feb 1, 2020.
Under current housing policies, Singaporean married couples who currently own a residential property but purchase a replacement home may qualify for remission of ABSD. But the condition is that they have to sell their first home within six months. “With the extension, they now have 12 months to sell their first property,” says Karamjit. “The government recognised that the slowdown would likewise resonate in the residential resale market.”
Married couples had complained that the original six-month time period to sell their existing home was too short, says Dentons’ Li. With the circuit breaker, they are finding it “even tougher” to sell their existing homes. Hence, the extension is “a very useful concession”, he adds.
With more time to find a buyer for their first home, these couples would not be pressured to reduce their prices sharply, thus averting “fire sales”, says ERA’s Mak.
- Additional reporting by Timothy Tay
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