Commentary on the extended ABSD remission deadline for Housing Developers for large complex projects

By Tricia Song (宋明蔚), Head of Research, Southeast Asia, CBRE

The five-year deadline for remission of ABSD paid on residential land purchased is to be extended by 6 months to 1 year for big en bloc rebuilds and complex ‘urban transformation’ projects.

CBRE's Comments

• With more time to complete and sell a large project, funding costs and contingency allowances can be reduced, developers could be more encouraged to undertake larger enbloc, complex and Strategic Development Initiative (SDI) projects. This is positive for urban renewal in older estates. 
• However, with still-elevated construction costs and interest rates, and an array of attractive sites on the government land sales (GLS) program, we are unlikely to see a sudden surge in residential enbloc activities, given the wide mismatch between the asking price of enbloc sellers and bid-price of developers. Developers will remain highly selective. Nonetheless, the certainty of an ABSD extension now helps by not placing a disproportionate risk on attractively-located but large enbloc projects.
• While large projects such as Emerald of Katong (846 units), The Orie (777 units) and Parktown Residences (1,193 units) have sold well and may not run into risk of missing the 5-year ABSD sales timeline, the extension of timeline for construction should still help for large-scale complex projects. At the very least, the longer timeframe should reduce anxiety among developers and their creditors or lenders.
• We understand the extension is not applicable to CBD Incentive projects as they are deemed to be less complex, often involving just a change of use, instead of more complex components.
• Given no change in ABSD regime for the end-buyers, we believe private residential demand and prices are unlikely to be affected in the near term, at least until more supply comes on. 

The Details

The Government announced on 5 March, among others, an extension to the ABSD remission timelines for complex projects.  

Currently, licensed HDs purchasing residential land are subject to ABSD, comprising a (i) non-remittable component of 5% and (ii) upfront remittable component of up to 35%. The upfront remittable component is clawed back with interest, if the following timelines are not met:
• Commencement of housing development within 2 years from the date of acquisition of the site (“commencement timeline”);
• Completion of the housing development within 5 years from the date of acquisition of the site (“completion timeline”); and
• Sale of all housing units within 5 years from the date of acquisition of the site (“sale timeline”).

To encourage HDs to undertake complex large-scale urban transformation developments, optimise land use through intensification or integration, rejuvenate older estates or adopt new construction technologies to achieve higher productivity targets, the Government will provide an extension to ABSD remission timelines for the following categories of projects:

Category 1: En bloc redevelopments where (i) the site yields at least 700 residential units upon redevelopment, and (ii) the number of residential units upon redevelopment is at least 1.5 times the number of residential units of the existing development;

Category 2: Projects with complex technical or infrastructural requirements. This  comprises the following:
• Sites integrated with major public transport facilities (e.g. MRT station, bus interchange);
• Sites with requirements to implement major public facilities (e.g. hawker centre, underpass that serves the general public);
• Sites with requirements to implement district-level infrastructure (e.g. district cooling system, district pneumatic waste conveyance system); or
• Sites with requirements to undertake extensive conservation works;

Category 3: Projects approved under the Strategic Development Incentive (SDI) scheme; and

Category 4: Projects that aim to achieve higher productivity targets, through the adoption of nascent construction technologies, methodologies or progressive practices.

Projects that fall within any of the four categories will be provided an extension of 6 months to the ABSD remission commencement, completion and sale timelines. Projects that fall within more than one category will be provided an extension of 12 months to the commencement, completion and sale timelines. These revisions to the ABSD remission timelines will apply to projects on residential land acquired on or after 06 March 2025.