The Ministry of National Development (MND) has recently announced changes to the Additional Buyer’s Stamp Duty (ABSD) regime for licensed housing developers, which will come into effect on March 6. This move aims to encourage developers to undertake urban transformation developments, optimise land use through intensification or integration, rejuvenate older estates or adopt new construction technologies.
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One of the key changes is an extension of the ABSD remission timeline for developers undertaking complex projects from six to 12 months. This extension will apply to projects with a minimum of 700 units upon completion, or those that have at least 1.5 times the number of homes of the existing development. These projects include en bloc redevelopments, as well as those with complex technical or instructional requirements, such as projects integrated with major public transport facilities.
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Another change is the inclusion of two new categories of projects that will be granted a six-month extension. These include projects approved under the Strategic Development Incentive (SDI) scheme, and those aiming to achieve higher productivity targets through the adoption of new construction technologies, methodologies or practices. If a project meets the criteria of more than one category, it will be granted a one-year extension.
These changes will apply to all residential land acquired on or after March 6. Currently, licensed housing developers purchasing residential redevelopment sites are subjected to a 5% ABSD upfront, which is non-remittable, and another 35% ABSD, which is remittable when the developer completes and sells all the units in the project within the five-year timeframe.
The latest revisions come after changes were announced in February last year, which offered a lower clawback rate for residential developments with at least 90% of units sold. PropNex Realty CEO Ismail Gafoor says, “Such extensions will give developers more flexibility and may help to mitigate development risks to some extent, as they have a bit more time to sell units, particularly for mega projects.”
Huttons Asia’s senior director of data analytics Lee Sze Teck believes that the ABSD revisions will “give a much-needed boost to the en bloc market, in particular, bigger en bloc projects.” Similarly, OrangeTee Group’s chief researcher and strategist Christine Sun says that while the proposed policy change will likely be appreciated, developers may still face challenges due to other factors. This includes the success rate of en bloc sales, which depends on the willingness of buyers and sellers to negotiate prices.
However, ERA’s managing director of capital markets and investment sales Tay Liam Hiap believes that this could be “an opportune time” for older projects such as Braddell View and Pine Grove to explore en bloc opportunities. These projects may yield around 2,000 new homes, which could take more time to sell. Meanwhile, Gafoor notes that the policy change may not “spark a revival in the en bloc market”, and expects developers to continue to be cautious due to the high cost of redevelopment, ample private housing supply, and potential policy risks.