Developers Grateful For Small Mercies

Source : The Business Times, January 24, 2009

They are glad that the Budget allows them to push back projects

NOT all their wishes for the Budget were met, but real estate developers were still glad to receive property tax rebates and other measures that would help them with project deferments in these tough times.

But even before the government stepped in, the slow property market had already forced several developers to hold back their projects. What the Budget does is to reduce the pain of doing so.

Among other measures announced on Thursday, the government gave a one-year extension of the completion period for private residential projects. It also extended from two to four years the period for developers with Qualifying Certificates to dispose of all residential units in their projects, and developers can rent out unsold units during this period.

The extended timeline creates 'more flexibility in the way we market the property and also provides an alternative source of revenue in the interim, through rental', said a City Developments (CDL) spokesperson. As a UBS Investment Research report also pointed out, the help 'relieves pressure on developers who bought en bloc projects in 2006-2008 to rush to complete projects and avoid exacerbation of residential price declines'.

But even before the Budget, some property developers were already delaying their projects in the face of slumping demand and prices. According to the Urban Redevelopment Authority yesterday, private residential prices fell 6.1 per cent in Q4 2008.

For projects which have not been built, developers have another incentive to postpone them as construction costs are expected to fall further.

'Developers have to defer (projects) whether they like it or not,' said Thio Gim Hock, CEO and group managing director of OUE. The developer, which bought The Grangeford at Leonie Hill en bloc in 2007, has put the property back on the rental market. It is also deferring another project, the Parisian.

Large property developers have made similar plans. Keppel Land said on Wednesday that it will consider delaying the construction of some projects to save costs. CDL also said late last year that it will hold back the launch of new residential projects such as The Arte at Thomson and The Quayside Collection.

'We will continue to monitor the market conditions closely, reassess and decide (launches) accordingly at the appropriate time,' the CDL spokesperson told BT.