Short-lease site for retirement housing offered

Property
Published November 14, 2006

Short-lease site for retirement housing offered

URA awaits applications to take 30-year LH plot off Reserve List

By ARTHUR SIM

THE Urban Redevelopment Authority (URA) will for the first time make available for sale a 30-year leasehold residential site. The chances are that it will be developed into private housing for retirees.

The URA said it will now accept applications to put the Jalan Jurong Kechil site on the Reserve List up for tender after it released sales conditions yesterday. These include incentive GFA for supporting medical or communal related uses that cater to the elderly and/or balcony use above the permissible GFA (gross floor area) but not exceeding 10 per cent.

The one hectare site has a GFA of 153,267 sq ft.

URA said the differential premium to be levied for any incentive GFA used will be determined on the basis as if such incentive GFA was for community or institutional use.

In addition, the building coverage for retirement housing can be allowed up to 50 per cent of the site to accommodate the additional communal facilities and other special requirements.

Minister of National Development Mah Bow Tan announced plans to release land for retirement housing in February but some industry players, like property developer Daniel Teo, had been looking into this as far back as 1997. Mr Teo's plans fell through due to projected high costs.

The prospect of cheaper land costs because of short 30-year leases should make it more feasible to build retirement housing. However, Mr Teo believes that it will still be difficult to come up with a profitable business model. 'The lease is too short,' he said. He also suggested that perhaps a 30-year lease with a 10+10 year option to extend might make it a compelling business proposition.

Mr Teo also maintains that the GFA incentive of 10 per cent is not very attractive. Having looked at retirement housing models around the world, Mr Teo said good designs usually require a building efficiency of 70 per cent. He noted that in Singapore, most private condominium developments are already being built at a minimum building efficiency of 90 per cent.

The ultimate land price will determine the feasibility of any venture and Ku Swee Yong, Savills Singapore director of marketing and business development, believes it could be even less than one-third the price of a 99-year leasehold residential site in the same area. Mr Ku estimates that a 99-year leasehold residential site there could cost around $500 psf but he expects potential bids of between $100-$120 psf. 'Construction costs could be higher given the the extra requirements for safety and health,' he said.

'The good thing is that you can build small units starting at 300-400 sq ft and charge about $150,000 per unit. This should be easy for retirees to fund,' he said.