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Industrial land tenure cut to 30 years
Jun 12, 2012
by Cheryl Tay The minimum occupancy period (MOP) for industrial sites under the government land sales (GLS) programme was shortened to 30 years to make industrial property more affordable and improve the government's flexibility for land redevelopment, announced by the Ministry of Trade and Industry (MTI). Of the 19 land parcels to be sold under the H2 2012 Industrial GLS Programme, nine larger sites, as well as to the remaining six sites in the first half, will have their tenure capped to 30 years, from the previous 60 years of tenure. "The move will make developers more prudent in their land bids because when it comes to end-property sales, 30-year leasehold properties are very vulnerable to market changes," said Tricia Teo, Executive Director at SLP International. "During Lehman's collapse in 2008, only one or two banks were providing financing for such properties." Chia Siew Chuin, Director of Research & Advisory at Colliers International, said, "The reduced tenures may be too short for industrialists especially those with a longer-term business horizon and for those who find the property to have diminishing asset value in the longer term." She noted that "most owners including end-users would also be concerned about the resale value of the property if the tenure runs too short. It would also be difficult to secure loans for properties with shorter tenures, thereby limiting the chance for end-users to build their own premises at a reasonable cost." On the confirmed list, the 30-year tenure applies to larger sites, including those parcels at Sunview Road, Woodlands Avenue 10, Serangoon North Avenue 5, Ubi Avenue 4 and Buroh Street in the Jurong area. They are aimed at developers as they may be out of industrialists' league. Meanwhile, the government has extended the tenure for 10 of the 16 sites in the Tuas South (pictured) area, from the 19 to 22 years. These sites are mainly targeted at industrialists looking to build their own customised facilities. "The government is now addressing the requirements of the end-user market," said a Knight Frank spokesman. "JTC is no longer building standard landed factories and the small plots on short tenure MTI is offering in Tuas will cater to industrialists keen on building such premises for their own use."