Foreigners need approval to purchase ‘Commercial & Residential’ sites, say MinLaw, SLA

/ EdgeProp Singapore |

July 19, 2023 2:40 AM SGT

Katong Shopping Centre has a 'Commercial & Residential' zoning under the Master Plan 2019 and is up for collective sale at an indicative price of $638 million (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Join our Telegram channel and follow our Facebook for the latest update.

SINGAPORE (EDGEPROP) - The Ministry of Law (MinLaw) and Singapore Land Authority (SLA) announced on July 19, 2023, that the 'commercial & residential' zone would be removed from its list of land use zones.

The rationale is that since 'Commercial & Residential' sites are predominantly for residential use, such developments will now be deemed as residential property and regulated under the Residential Property Act (RPA). "This is to better reflect the intent of the RPA to safeguard residential land for Singaporeans," according to the release on July 19.

As the changes took effect from midnight on July 20, 2023, any foreign buyer – individual or entity – who wants to acquire an interest in a piece of land or property zoned for 'commercial & residential' use would need to apply for approval under the RPA, according to the press release. (Find Singapore commercial properties with our commercial directory)

Foreigners who are existing owners of land or property with such zoning are exempted from obtaining approval under the RPA if the intention is to retain the property as-is. However, they will need to seek approval under the RPA should they wish to retain and redevelop the property.

They can also be exempted from obtaining approval under the following conditions:

The sellers granted the option-to-purchase (OTP) to potential buyers before July 20, 2023;

The OTP is exercised on or before August 9, 2023; and

The OTP has not been varied on or after July 20, 2023.

With 'Commercial & Residential' zoning removed, the following seven uses will be added to the list of land use zones:

1. 'Business 1'

2. 'Business 2'

3. 'Business 1 – White'

4. 'Business 2 – White'

5. 'Commercial/Institution'

6. 'Reserve Site'

7. 'Special Use'

Residential uses are typically not allowed under these land use zones.

Sites for 'Commercial & Residential' are intended for mixed residential and commercial developments. Under URA’s interpretation of this zoning, commercial use is capped at 40% of the maximum allowable floor area, while the residential component has to be at least 60%.

Examples of mixed-use developments with commercial and residential zoning include Bukit Timah Plaza/Sherwood Towers, Katong Shopping Centre and Sixth Avenue Centre. Many were built in the 1970s and 1980s and are attempting a collective sale.

The strata-titled owners of the Bukit Timah Plaza/Sherwood Towers mixed-use development are attempting a collective sale. Under the Master Plan 2019, the site is zoned for 'Commercial & Residential' use with a gross plot ratio of 3.0. The mixed-use development has a 99-year lease from 1976.

Bukit Timah Plaza has a 'Commercial & Residential' zoning and a 99-year lease from 1976 (Photo: Brilliance Capital)

Katong Shopping Centre made its fourth collective sale attempt on July 10 at an indicative price of $638 million. The price is unchanged from its previous tender, which was launched on April 18 and closed on May 19.

Located on the corner of Mountbatten and Haig Road, Katong Shopping Centre has a freehold site of 86,924 sq ft. Under the Master Plan 2019, Katong Shopping Centre is zoned for commercial and residential use at a gross plot ratio of 3.0.

According to Edmund Tie, the marketing agent for Katong Shopping Centre, the site can be redeveloped into an integrated development at its existing plot ratio of 3.223, with the option of converting the residential component into serviced apartments, subject to approval by the authorities.

Sixth Avenue Centre - EDGEPROP SINGAPORE

Sixth Avenue Centre, which attempted a collective sale last year at an $85 million price tag is zoned for 'Commercial & Residential' use under the Master Plan 2019 (Photo: Cushman & Wakefield)

Sixth Avenue Centre, a freehold mixed-use site at 805 Bukit Timah Road, was last relaunched for collective sale via tender on April 19, 2022, by marketing agent Cushman & Wakefield. The reserve price was $85 million.

Completed in the mid-1980s, Sixth Avenue Centre comprises seven shops and 18 apartments. It occupies a prominent corner plot of 15,009 sq ft at the junction of Bukit Timah Road and Sixth Avenue. It is three minutes from the Sixth Avenue MRT Station on the Downtown Line.

Zoned 'Commercial & Residential' with a gross plot ratio of 3.0 under the URA Master Plan 2019, the site has a maximum gross floor area of 45,028 sq ft. Up to 40% of the gross floor area has to be dedicated to commercial use, with the remaining 60% for residential use.

mixed-use developments - EDGEPROP SINGAPORE

Shophouses and small mixed-use developments zoned for commercial use on the first level and residential use on the upper floors are likely to be affected by the new ruling, with foreigners having to seek approval for such purchases, say property consultants (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Tan Hong Boon, executive director of capital markets at JLL, believes that the impact will be minimal for collective sale sites with 'Residential & Commercial' zoning. "Foreign developers who buy these collective sale sites for redevelopment will now have to take another step in seeking approval," says Tan. "It will be similar to seeking approval for buying a residential collective sale site under the Qualifying Certificate (QC) scheme.”

Under the QC scheme, developers have to complete the residential project within five years and sell out all the units within two years of completion. Failing to do so will incur extension charges based on 8%, 16% and 24% of the land purchase price for the first, second and third year, respectively. The extension charges will be pro-rated according to the number of unsold units.

According to Alan Cheong, executive director of research & consultancy at Savills Singapore, the properties that are most likely to be affected are the conservation shophouses and small mixed-use developments with 'Commercial & Residential' zoning. Foreign investors are already avoiding buying such properties as they have to pay additional buyer's stamp duty (ABSD) on the residential portion, which has doubled from 30% to 60% from April 27, 2023.

"So foreign money will be squeezed into commercially zoned shophouses and strata-titled commercial and retail space," adds Cheong. Foreigners who own such shophouses will have to seek approval to add a rear extension. Those who own a mixed-use development and wish to redevelop it must also seek approval.

Check out the latest listings near Bukit Timah Plaza, Katong Shopping Centre, Sixth Avenue Centre, Sherwood Towers, Sixth Avenue MRT Station

Tags: