BT : Reserve list system set for review

Business Times - 05 Feb 2010

ECONOMIC STRATEGIES COMMITTEE
Reserve list system set for review

Reducing deposit for developers who try to trigger site sales may be considered

By EMILYN YAP

A REVIEW of the reserve list system for government land sales is in the works, after the Economic Strategies Committee (ESC) called for changes to help developers trigger the sale of sites more easily.

This would be the first revamp of the system since it was introduced in 2001. One possible tweak could allow developers to pay lower deposits after they apply for a site on the list.

In a report released yesterday, the ESC sub-group tasked to find ways to boost land productivity noted the importance of managing cost volatility. The degree of fluctuation in housing and office rents could influence corporate and individual decisions to relocate to Singapore, it said.

Reviewing the reserve list system to make it 'less onerous' for developers to trigger the sale of sites could ensure that 'supply can be more easily activated when needed'.

Senior Minister of State for National Development and Education Grace Fu, who is also co-chair of the sub-group, shared more details in an interview. She said there has been feedback from developers about the cost of triggering the sale of sites.

'We are trying to look at ways to make this as low-cost as possible, so developers do not have to cross a very high barrier to trigger,' she said. 'That is to make the government land sales system more responsive to the market.'

At present, a developer keen on a site on the reserve list has to submit an application to the government, stating the minimum price it is willing to pay. Only when the state accepts the application will the developer have to pay a deposit, which is 5 per cent of the minimum price committed.

The developer has two weeks to pay the deposit via a cashier's order, banker's guarantee or a bank transfer. If this does not happen, acceptance of the application lapses.

Take the sale of a residential site at Upper Thomson Road last year, for example. A developer committed to pay at least $82 million for the plot. This means the deposit was $4.1 million.

Industry players BT spoke to had few issues to raise about the reserve list system. Roxy-Pacific chief executive Teo Hong Lim said financially-prudent developers would most likely have 'blessings of bankers' before even applying for a site. A Hiap Hoe spokesperson agreed, saying developers would usually have prepared funds for the entire development cost when bidding for a site.

Reducing the deposit needed could encourage a few more developers to apply for sites, said Ngee Ann Polytechnic real estate lecturer Nicholas Mak. The deposit could be cut to 2-3 per cent of the minimum price committed, he added.

Apart from the deposit, other procedures in the reserve list system are under review. Knight Frank chairman Tan Tiong Cheng suggested the government provide an indicative range of reserve prices for sites, so developers can be more certain their application would be accepted.

On the whole, the system works 'pretty well', he said. 'It's a case of what's in the reserve list. The quality of the sites is important.'

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