Is QC exemption balm enough to soothe the coronavirus-bruised property market?

By Cecilia Chow/ EdgeProp Singapore|February 7, 2020 1:35 AM SGT

SINGAPORE (EDGEPROP) – On Feb 6, Singapore-listed property groups such as CapitaLand, City Developments (CDL) and UOL Group, as well as the Real Estate Developers Association of Singapore (Redas), welcomed the move by the government to exempt public-listed housing developers with substantial stakes in Singapore from the Qualifying Certificate (QC) regime.

The QC exemption for public-listed developers is likely to bring some relief to listed property groups which purchased en bloc sites during the en bloc fever of 2017 to 1H2018 (Photo: Samuel Isaac Chua/EdgeProp Singapore).

“It is also timely especially due to the outbreak of the Novel Coronavirus, where Singapore developers and the real estate industry are facing unprecedented and rapidly evolving challenges,” says Liam Wee Sin, group CEO of UOL Group. Under the Residential Property Act, foreign residential property developers which purchase private residential land for development have to apply for QC. A QC holder will have to complete a residential project within five years and sell all the units within two years of completion. Failing to sell out the project would mean incurring extension charges of 8%, 16% and 24% for the first to third years respectively. However, the extension charges are prorated according to the balance unsold units. 

Prior to the QC exemption which came into effect from Feb 6, Singapore-listed companies with just one foreign shareholder were considered foreign property developers. This has been a sore point for the Singapore-listed property groups for many years.“This change has been long-awaited as the QC policy places listed developers who are locally controlled companies like CDL in a disadvantaged position, as we are subjected to double penalties of QC and ABSD [additional buyer’s stamp duty],” a CDL spokesperson says in a statement. Singapore-listed housing developers which are existing QC holders can still apply for an exemption status for some of their projects, says Lee Liat Yeang, senior partner of corporate real estate at law firm Dentons Rodyk. “This applies even to those who have completed their developments but are still subject to the QC conditions,” he adds. However, they have to meet certain criteria stipulated by the Land Dealings Approval Unit: incorporation in Singapore and listing on the Singapore Exchange; principal place of business to be in Singapore; chairperson and the majority of the board members to be Singapore citizens; shareholders to be substantially Singaporean; and a track record of housing development in Singapore.

CDL’s 592-unit Amber Park could stand to benefit from the QC exemption (Photo: City Developments)

CDL, for example, is developing the 592-unit Amber Park with Hong Realty, a unit of its parent company, the privately held Hong Leong Holdings. The project is a redevelopment of a condo of the same name which the joint venture purchased en bloc in October 2017 and launched in May 2019. “[Amber Park] may stand to benefit from this change,” says CDL.

This latest change in QC could bring some relief to listed property developers with unsold inventory, says Christine Li, Cushman & Wakefield head of research for Singapore and Southeast Asia. “It could ease the pressure to clear inventory when the market is increasingly faced with economic challenges arising from the virus outbreak,” she adds. However, the government said in its Feb 6 announcement that it is “making no changes to the existing property market cooling measures, which were put in place to keep private residential property price increases in line with economic fundamentals”.In particular, the ABSD remains in place, which means developers still have to develop and sell all the residential units within five years, failing which they will be subject to the ABSD charges. The ABSD penalty, which was raised from 15% to 30% in July 2018 (of which 5% is non-remittable), is more onerous compared to the QC penalty. The timeline is also shorter: five years compared to seven years for QC.

“The extra two years under the QC regime for public-listed developers to sell all their units has been rendered unnecessary with the introduction of ABSD,” points out Huttons Asia’s director of research, Lee Sze Teck. The QC exemption for public-listed developers is likely to bring some relief to listed property groups which purchased en bloc sites during the en bloc fever of 2017 and 1H2018, for instance, the large, privatised HUDC estates and prime freehold sites. “This will help reduce the additional penalty payments of the QC, especially for those who fail to sell their projects within the five-year period,” notes Tay Huey Ying, head of research & consultancy for JLL Singapore.“The new QC exemption rules will effectively mean one less reason for some public-listed property groups to apply for delisting and to become a Singapore company,” reckons Dentons Rodyk’s Lee. Developers are hoping that “in light of the more subdued market sentiment and the challenging economic outlook, the government will continue to review market conditions and make further policy tweaks”, says Redas.

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