http://www.businesstimes.com.sg/arch...opers-20130701

Published July 01, 2013

What the QC and ABSD policies mean for developers

By Felda Chay


The Qualifying Certificate (QC) policy

UNDER the Residential Property Act, a "Singapore company" is a firm incorporated in Singapore whose shareholders and directors are all Singapore citizens. Firms whose shareholders and directors include some foreigners are considered foreign companies.

All SGX-listed property developers are not considered Singapore companies since some of their shares may be owned by foreign investors.

This means that they need to obtain a QC in order to buy private land for development. Sites bought from the Government Land Sales (GLS) programme are exempted from the QC requirements.

A developer issued with a QC is given up to five years to complete construction of the project and obtain the Temporary Occupation Permit (TOP). The developer is then given two years after obtaining the TOP to market and sell all units in the development. Renting out the unsold units is not allowed.

To ensure compliance, the developer has to put up a banker's guarantee for 10 per cent of the purchase price of the property, which may be forfeited if he fails to fulfil the QC's conditions.

Since January 2011, a developer is given the option to pay an "extension charge" if he cannot meet the five- year deadline from the issue of the QC to complete his project.

This works out to 8 per cent, 16 per cent and 24 per cent of the property purchase price for the first, second and third extra years, respectively.

If he fails to sell all the units two years after TOP, he may opt to pay a "pro-rated" extension charge, based on the proportion of unsold units he still holds.

The Additional Buyer's Stamp Duty (ABSD)

Since late 2011, developers here have to develop any residential site they buy, and sell all the units in the new project within five years, or face paying the ABSD.

The ABSD applies to both GLS sites and private land, and both Singapore and foreign companies.

For sites bought between Dec 8, 2011, and Jan 11, 2013 (both dates inclusive), a 10 per cent ABSD is payable. For sites bought from Jan 12, 2013, a 15 per cent ABSD is payable.

The ABSD, with interest (at 5 per cent per annum, compounded), becomes payable immediately upon expiry of the five-year deadline.