from the ground Up

by Jessica Cheam, The Straits Times, April 14 2009

MARKET rents for HDB’s commercial and industrial tenants have fallen 5 per cent since January, Senior Minister of State for National Development Grace Fu said yesterday.
The drop is in line with market conditions and is part of HDB’s regular review of market rents, she told Parliament.
Ms Fu highlighted the change to Madam Cynthia Phua (Aljunied GRC) who had asked if rental rates were being adjusted to market conditions.
Ms Fu also said that tenants, on renewing their leases, would have their rents adjusted to the market price, to make it fairer for all.
The HDB leases shops that are part of housing estates, along with office and factory space in industrial estates, as well as industrial land.
However, it will not freeze rents across the board because “a freeze on rent increases is not equitable as it will result in different rental subsidies for different tenants”, said Ms Fu.
“It is also not advisable for HDB rents to be disconnected from market realities. A better approach to help businesses during the economic downturn is to provide rental rebates.”
She gave this response to Ms Lee Bee Wah (Ang Mo Kio GRC) who had asked whether the HDB and industrial landlord JTC Corp would freeze all rents.
Ms Lee also asked if tenants whose rents were raised recently could have them lowered to the previous level.
Ms Fu reiterated that rents have to be pegged to market rates to “ensure equity between two tenants”.
To help tenants, HDB and JTC are giving a 15 per cent rent rebate for commercial and industrial space for this year, as announced in the Budget, said Ms Fu.
For the small group of tenants who face substantial rent hikes despite these measures, HDB will stagger the increase over the tenancy term, she said.
Tenants can opt to renew their typical three-year leases for one or two years if they foresee rents falling.

Refinancing guarantees: Govt won’t step in

THE Government will not step in to guarantee loan extensions for property developers, said National Development Minister Mah Bow Tan yesterday.
He told Parliament that banks are still lending to developers and better placed to assess risks than the Government.
“Besides bank loans, a number of developers have also managed to raise capital through other means such as rights issues or private placement,” he said.
The minister was responding to a question from Ms Lee Bee Wah (Ang Mo Kio GRC) who asked if the authorities would consider assisting builders by bearing some of the banks’ lending risks for loan extensions. Recent financial reports have warned that local property developers may face problems refinancing debt because of tight credit markets.
While Mr Mah acknowledged that banks had become more cautious in approving loans to firms, he maintained that “these are commercial decisions that the banks themselves have to take, based on their assessment of the risks as well as the relationships they maintain with their customers”.
Data from the Monetary Authority of Singapore shows that total loans to the building and construction industry – mostly to developers – saw a 22 per cent hike in the 12 months to this February. While this growth has tapered off recently, total loans to the sector are still at a high of $50 billion, noted Mr Mah.
Help measures for the sector announced during the Budget include property tax deferment on land approved for development for up to two years, and 40 per cent property tax rebates for commercial and industrial properties.
Mr Mah said the Government will continue to monitor the situation closely. “If necessary, we are prepared to introduce further measures to help developers through the current downturn.”