More project details, simpler payment schedule for homebuyers among URA's proposed changes

Public feedback sought on proposed changes, which aim to help homebuyers make better-informed decisions and to better protect buyers of uncompleted private residential properties

Jan 05, 2022

THE Urban Redevelopment Authority (URA) is seeking public feedback on key proposed amendments to the Housing Developers Rules (HDR) in Singapore.

Among the suggested changes are a simplified schedule for homebuyers to pay the final 15 per cent of the purchase price, a requirement for developers to provide more information on their housing projects, prior approval for advertising the features of a project, and a reduced threshold for claims for any shortfall in the area of a unit.

These are intended to help homebuyers make better-informed decisions and also to better protect buyers of uncompleted private residential properties, URA said in a press statement on Wednesday (Jan 5).

Members of the public can submit their feedback online at go.gov.sg/hdr-consult from now till Feb 5, 2022. URA will consider the feedback before finalising the HDR amendments.

The rules aim to protect homebuyers' interests by imposing on developers requirements and standard contracts for the sale of uncompleted private residential properties.

One of the potential changes is for homebuyers to follow just 1 sequence flow when forking out the final 15 per cent of the purchase price. They will first pay 13 per cent - that is, 8 per cent goes to the developer and 5 per cent will be held by the Singapore Academy of Law - when the certificate of statutory completion (CSC) is issued. After that, they will make the final payment of 2 per cent to the developer on the completion of the sale and purchase.

URA noted that in the current payment schedule, the timing for this 15 per cent payment can vary depending on whether the CSC or completion date occurs first.

The authority is also proposing that developers should provide more accurate and detailed information on their housing projects to buyers. These include the developer's track record and past projects, the storey layout plans of the project, as well as information on ground rent payable and the identity of the landowners.

For example, the developer will have to mark out void areas in unit floor plans, explain abbreviations used in the floor plans, and include additional information on the location of key communal facilities. For landed properties, they will be required to provide a scaled floor plan showing each storey based on the approved building plan.

Developers will also have to provide their Construction Quality Assessment System (Conquas) and Quality Mark scores, as well as Green Mark certification for their completed projects in the past 5 years, URA proposed.

OrangeTee & Tie chief executive officer Steven Tan said: “As prospective buyers of new developments can only rely on information provided by developers in making their purchase decisions, the requirement to provide more information will definitely be beneficial to the buyers.”

For example, providing a storey layout plan will answer many common questions from buyers, such as the location of rubbish chutes and staircases, as well as whether the units are facing each other. “This will be an improvement from the current practice of having agents try to answer such questions by referring to the main building plan,” Tan said.

In addition, before developers include the features of a housing project in advertisements, URA is proposing that they obtain prior approval from the authorities. This is to assure homebuyers that the advertised features - such as a vehicle pick-up or drop-off point, landscaping and water features - will be built in the actual development.

For developments which have obtained the temporary occupation permit (TOP) or CSC, developers will have to state the TOP or CSC date in the advertisements.

Lee Nai Jia, deputy director of the Institute of Real Estate and Urban Studies (IREUS) at the National University of Singapore, said that the rule amendments are not likely to be too onerous for existing developers, especially those with good track records.

“But I think it will be more challenging for newcomers or overseas developers to market their properties. Hence, newcomers may partner existing developers or establish their track records through construction projects,” he said.

Likewise, ERA Realty head of research and consultancy Nicholas Mak said the requirement for developers to detail their track records will benefit consumers but disadvantage new and smaller developers that have only recently entered the property market.

URA is also seeking to change the terms in the standard sale and purchase agreement (SPA), to enhance the protection of homebuyers.

This will entail a lower tolerance level for claims for shortfalls in unit area. Currently, developers are required to compensate homebuyers when the actual area in the unit is smaller than the area stated in the SPA by more than 3 per cent. This threshold will be reduced to 2 per cent, under the proposed amendments.

And if the SPA is annulled, developers will be required to refund homebuyers for additional cost items, such as interest paid on loans, loan cancellation charges and legal fees paid by the buyer, subject to a cap of 15 per cent of the purchase price. This will be on top of the existing requirement for developers to refund all instalment payments and any stamp duty paid by the buyer.

Overall, Dr Lee expects the proposed changes to the HDR to be beneficial to homebuyers at the onset, though he suggests more could be done.

“For instance, the developers may provide the Conquas score, but the consumers may not understand what the score means,” he said.

“Additionally, the dispersion of Conquas scores of projects seems narrow. For instance, Kingsford Hillview Peak had a score of 70 per cent and Kingsford Waterbay had a score of 82.7 per cent despite their well-documented issues,” Dr Lee said.

Huttons Asia senior director of research Lee Sze Teck noted that Conquas may not provide a fair assessment when it comes to developers. "Conquas is a better reflection of the main contractor's quality rather than the developer's. Furthermore, developers may select different contractors for different projects," he said.

Another of URA's proposed amendments to the rules is for the 12-month defects liability period (DLP) and the homebuyer's obligation to pay maintenance charges to start closer to the date when the buyer takes possession of the property.

IREUS' Dr Lee suggested that a longer DLP period - for instance, by extending it to 2 years overall and also giving more time for structural flaws that cannot be readily observed - will be more helpful to homebuyers, who may not be able to detect such flaws easily.

Mak noted that the potential rule changes are aimed at enhancing consumer protection, which has become even more pertinent now in the wake of the latest property curbs. “With the new cooling measures, many of the buyers will be owner-occupiers (instead of investors) who will be buying their one and only private residential property,” he added.

Meanwhile, Lee from Huttons said these key amendments will improve transparency and protect the interests of buyers.

However, the proposed changes "place a larger burden on developers and add to the costs of compliance in an increasingly competitive landscape", he said, citing as examples the reduced threshold for claims for shortfall in area, the later commencement of the DLP and the enhanced refund coverage if the SPA is annulled.

He anticipates construction costs - which have already surged amid pandemic-related disruptions - to increase further due to the reduced threshold for claims and if developers are to provide more details in the plans given to homebuyers. Besides, the refund of additional cost items, capped at 15 per cent of the purchase price, also appears high. "These costs may eventually be passed on to buyers," he noted.