Developers to be held to higher standards of accountability

SINGAPORE — Developers with poor track record may have to fulfil more stringent license conditions to obtain a Quality Mark certification for their projects, or be barred from launching units for sale until the authorities are certain that they are committed to meeting the required standards, said National Development Minister Lawrence Wong on Tuesday (Nov 14).

These are among the measures being mulled over to hold developers to "higher standards of accountability", said Mr Wong.

Speaking at a dinner celebrating the 58th anniversary of the Real Estate Developers' Association (Redas), he noted that higher land prices and more stringent stamp duty requirements may cause developers' profit margins to come under pressure. This may in turn lead some to compromise on construction quality.

The Urban Redevelopment Authority and Building and Construction Authority will be stepping up checks in this regard, he added.

"I believe the vast majority of our developers are responsible and will not compromise on quality… But what we are seeking is to differentiate the potential black sheep from many of our responsible developers who look out for the interests of our homeowners," he said.

The authorities have also made quality scores of developers more accessible to allow consumers to identify high-quality projects and make better informed purchasing decisions, said Mr Wong.

He also urged developers to consider "the extent of risk they are prepared to take" in their land bids. "Remember that under the Additional Buyer's Stamp Duty (ABSD) regime, developers have to build and sell their units within five years from their land purchases or risk paying penalties," he cautioned.

The ABSD - first introduced in 2011 and raised two years later - is a tax levied on both individual property buyers and developers. Developers with unsold units within the stipulated duration are required to pay an ABSD of 10 to 15 per cent, including interest, on the land cost of the project. The amount which buyers have to pay depends on their residency status and the number of properties which they already own.

Commenting on the state of the property market, Mr Wong noted the improvement in overall sentiments. He reiterated that the housing supply will be "more than sufficient" to cater to Singaporeans' needs, with an injection of a "large supply" of new housing units expected over the next one to two years.

A large portion of this will come from the redevelopment of projects that have been sold en-bloc, he said.

With the market currently experiencing high vacancies, he pointed out that the vacancy rate has remained above 8 per cent for almost two years. The Republic has not experienced such a situation since 2005, he added.

At 8.4 per cent, the current vacancy rate translates to 30,000 vacant private housing units — more than the total number of dwelling units in Bishan today, said Mr Wong.

"(I) would like to assure Singaporeans who are looking for private homes at this time. There is more than enough supply to meet (occupancy) demand. Do your homework carefully before making your home purchases," he said.

While lauding the measures to hold the industry to higher standards, developers felt different standards should apply to across different market segments in the industry.

"Developers with high construction quality standards would not worry about such quality requirements. The question is how policy-makers would (impose different) quality standards for different products in different market segments," said Mr Lock Wai Han, chief executive officer of OKH Global.

The suggestion to bar developers from launching new units may be "too onerous", said Mr Lock.

"For the developer to lose money for the whole project due to contractor's poor workmanship is rather onerous. If the contractor just declared bankrupt, what recourse does the developer have?" he asked.

Mr Vincent Ong, managing partner of Evia Real Estate, pointed out that the existing Quality Mark scheme for all new private residential projects is voluntary, with "minimum standards criteria". The scheme could set a higher bar and be made compulsory, he suggested.

On Tuesday, Redas and the Urban Redevelopment Authority also launched a competition to crowdsource ideas from the public to "enhance health and wellness" in commercial developments, such as shopping malls. Six prototypes will be selected and placed at malls, and patrons will vote for the winning prototype. Interested members of the public can register and submit their project proposals online from now to Feb 7.