Lease renewals:Govt waives building charge
IN AN apparent move to make Singapore more competitive for investors and businesses, the Government is doing away with the building premium it charges when state leases are granted extensions. The waiver will take place with immediate effect, the Singapore LandAuthority (SLA) said yesterday.
In general, the Government’s policy is to allow leases to expire without extension, but it does consider renewals on a case-by-case basis, said the SLA. While the SLA said the change was “to remove the disincentive for lessees to upkeep or upgrade their buildings”,industry analysts said it would help lower business costs.
Dr Chua Yang Liang, head of research from Jones Lang LaSalle, said: “In terms of short-term industrial leases, by removing the building premiums, it is removing a cost element from the business perspective. The underlying motive could be one to make Singapore a more competitive place for investors.”
He added: “It appears to target the industrial sector because of the nature of their tenures right now, which are about 15 to 30 years, depending on their industry status.”
Industry experts also pondered the purpose for a building premium as it appears to be a little-used fee.
“According to our research, there is no formula available to calculate building premiums. Compared to differential premiums, which could add a substantial amount to costs, we do not know how big a proportion these premiums will add to the cost in development,” said Mr Nicholas Mak, director of research from property consultancy Knight Frank.
“We may not see a substantial impact because the premium is not levied frequently. It could just be a streamlining of processes by the authorities.”
This is not the first time for such a move. In 1997, the Government waived the premium for short-term industrial and institutional leases to lower costs for businesses.
Source : Today - 2 Sept 2008
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