Govt raises development charge from 50% to 70%
Wed, Jul 18, 2007
AsiaOne
The government will revise the Development Charge (DC) for new building projects from 50 per cent to 70 per cent, in line with the buoyant property market.
The revised rates, which come into immediate effect, will apply to development applications where provisional permission is issued from today.
They will also apply to cases that are granted a second or subsequent extension to their provisional permission on or after this operative date.
A statement from the National Development Ministry today said the DC rates have been revised to reflect the appreciation in land value, and is a reinstatement of what it was in 1985.
The government reduced the DC from 70 per cent to 50 per cent in 1985 to avoid eroding the share of value enhancement to the developers in the then declining market due to the recession.
"With the current buoyant property market, the converse is true. Thus, the government has decided to reinstate the DC to its original rate at 70 per cent," said the ministry statement.
DC rates are set baced on the principle of sharing of enhanced land value. Currently, they are pegged at 50 per cent of the enhancement of value.
The current formula is based on an adjustment made during the 1985 recession.
The DC is levied when the land value of a site can be enhanced due to the government's rezoning of the site to a higher value use or increasing the plot ratio.
The DC system, where a part of the enhancement in land value is taxed, allows the State to have a share of the gains from the value enhancement arising from its grant of planning approval.
The portion of the gain taxed by the government can then be used to offset expenditure on infrastructure improvements, such as road and rail works, and utilities to support the higher land zoning or intensification of land.
The balance of the gain is retained by the owner and provides an incentive for him to undertake the development work.
The ministry statement says for land with title restrictions on the use and intensity, which are subject to a levy of differential premium by the Singapore Land Authority, the differential premium will similarly be adjusted to 70 per cent.