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Simpler rules for deciding DC payment from Jan

URA will use only 2003 Master Plan to cap development baseline values

RULES on whether proposed building works will have to pay a Development Charge are to be simplified.

The DC, which can be payable when land is redeveloped more intensively, is at present calculated using baselines set in the 2003 Master Plan, or sometimes with the earlier MPs of 1958 or 1980. From January 1, the Urban Redevelopment Authority (URA) intends to use only the 2003 MP to cap development baseline values.

However, some existing developments will have their higher baseline values safeguarded, and will be exempt from paying a DC even if the site is redeveloped to a baseline value higher than MP 2003.

After the recent increase in DC rates, the charge can in some cases amount to more than $100 million, which is a hefty amount compared to the average of $250 million that the URA has collected annually in DCs for the last five years.

The URA said yesterday that only about 2 per cent of all existing private land lots (or about about 1,700 plots mostly in the Central Region) have high historical baselines and even fewer approved developments are built over the plot ratios stipulated in MP 2003.

One such development, which is currently up for collective sale, is Pacific Mansion in River Valley.

Marketed by Savills Singapore, its director of investment, Steven Ming, estimates that the 45-year-old Pacific Mansion is currently built up to a 3.84 plot ratio.

Under the MP 2003, the plot ratio for the area is only 2.8, but Mr Ming says that the URA will permit any new development built on the site to be built up to the present plot ratio of 3.84, making the site particularly attractive as no development charge will be payable.

Mr Ming says that if the URA had not honoured the existing built up plot ratio and not given a development charge exemption, and instead levied development charges based on the existing gross floor area, the development charge for a new development built up to a plot ratio of 3.84 would amount to around $112.8 million, based on the current DC rate of $9,100 psm for the area. This, incidentally is almost three times the DC rate at the end of 2003 when it was about $2,300 psm.

The savings from not having to pay a DC is ‘hypothetical’, as most developers would have factored this into the land value. But as DC rates rise, so does this hypothetical development charge. Mr Ming adds: ‘This is definitely a figure that a developer will consider when looking for a collective sale site.’

Another attractive site on the market is Elizabeth Towers at Mount Elizabeth which has an indicative price of $673 million or about $2,666 per square foot per plot ratio (psf ppr).

Marketed by Newman & Goh, its head of investment sales Jeffrey Goh estimates that the existing building is currently built up to a plot ratio of 4.65 while the plot ratio based on the MP 2003 is also 2.8.

And Mr Goh added: ‘With Westwood Apartments (off Orchard Boulevard) setting a new benchmark price, I expect DC rates to be revised upwards again.’

As with Pacific Mansion, a redeveloped Elizabeth Towers can be built up to the existing built up plot ratio. And the charge of about $110 million, based on the current DC rate of $11,900 psm for the area, is not payable.

But there are not many of such sites around.

Also up for sale with no DC payable is Grange Heights on Grange Road. It is marketed by Jones Lang LaSalle, whose regional director, Lui Seng Fatt, says that not all old developments see such huge figures in the exempted DC amount. ‘For many developments, it may be around $10 million,’ he said.

Indeed, for most developments on the collective sales market, there will be no DC payable because the existing development has not been built up to the current MP 2003 plot ratio.

Willyn Ville at Holland Village is currently built up to an estimated 1.3 plot ratio, even though the plot ratio based on earlier MPs was higher than the 1.4 stipulated in MP 2003.

The difference of course is that Willyn Ville was never built up to the old plot ratios. It is marketed by Chesterton International, whose associate director, Mark Yuen, said: ‘A development that has been built up over the existing MP 2003 is different because the government can’t take back what has already been paid for.’

The revised baseline definition was first announced in 2003. Before the change, development baselines were determined by the highest baseline in MP 1958 or 1980 or that of the approved development.

 

Source: Business Times 6 Dec 07

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