_URA Incentive Schemes: should their validity be extended?
About the Schemes
URA introduced the Central Business District Incentive (CBDI) and Strategic Development Incentive (SDI) schemes in 2019 to encourage selective rejuvenation of our core business district and other strategic areas to achieve positive transformation in these areas. URA later updated the conditions to be imposed on all redevelopments under these two schemes from April 2022 to align with the construction industry Transformation Map (ITM) standards, restrictions on strata sub-division for commercial uses, among other requirements.
The CBDI scheme is necessary to rejuvenate the older parts of Singapore’s CBD area and stimulate redevelopment of ageing assets. In this way, the district can be made more vibrant after office work hours by injecting higher resident catchment, which in turn could bring more footfall and business opportunities. This scheme is likely also being spurred by longer-term plans to expand the central district with live-work-play aspirations, notably future integration with the Greater Southern Waterfront masterplan. Among the conditions, the minimum site area imposed at selected locations of the CBD for incentive eligibility is a practical approach to introduce mix uses with spatial floor plate efficiencies, while qualifying more sites as several of them in selected areas are of smaller site areas compared to Marina Bay and Raffles Place.
The SDI scheme, meanwhile, targets Orchard Road and Marina Centre areas and is viewed to be progressive to spur the rejuvenation of these commercial districts. It is introduced to foster holistic integration of developments and seeks to resolve gaps in physical conditions through regulations, such as requiring a minimum of two adjacent sites in the redevelopment proposal unless the single site proposal can demonstrate positive impact towards the rejuvenation of the street block or precinct to be exempted from eligibility criteria.
Projects leveraging the Strategic Development Incentive (SDI) Scheme or the CBD Incentive Scheme
Impetus to extend Schemes Validity beyond November 2024
With the schemes’ initial terms ending on 26 November 2024, I view that they ought to be extended beyond this validity timeline, considering the onslaught of the COVID-19 pandemic that has upended property developments and construction efforts from 2020 to 2022. Business activities only normalised from mid-2022 with the gradual lifting of COVID-19 safe management measures; however, the pick-up in property development and investment momentum was later hampered by rising interest rates and escalated construction costs.
Coupled with the updated conditions being imposed on all redevelopments under the CBDI and SDI Schemes since April 2022, considerable lead time is required by interested property owners to conduct project feasibility and market studies, concept designs and technical studies before an Outline Application is made. A consultation process with the URA and relevant agencies will follow, which can stretch from three months to over six months and planning approval could be granted thereafter.
Elevated development costs prompt deeper review of project feasibility
While the increase in Gross Plot Ratio from proposed land uses under the schemes look attractive prima facie, the Land Betterment Charge (LBC) payable for an increase in development intensity, in addition to lease upgrade for leasehold properties which are almost necessary for redevelopment projects, are high-quantum development costs that would impact the financial feasibility of the proposed project scheme. Considering the high costs of LBC from the development intensity uplift and lease renewals, coupled with the reduced proposition for residential schemes due to the 60% Additional Buyer’s Stamp Duty imposition on first-time foreign homebuyers, the schemes are currently not attractive to spur developers to embark on asset rejuvenation especially for mixed-use schemes with a high component of residential units.
Notwithstanding the incentives under these two schemes, developers have been weighed down by the high interest rate environment and elevated construction costs, which greatly reduced margins for redevelopment schemes such as the CBDI and SDI schemes. The long process of design development and obtaining approval for such projects — from proposal conceptualisation and Outline Application to consultation with agencies on the proposed project scheme — is perceived to be extended by the requirements set by enhanced construction industry ITM standards, which the industry is still in the process of adjusting towards greater coordination and efficiency. This potentially elongated process till the actual payment of LBC to SLA could heighten the risk of under-estimation of LBC cost under a scenario of rising LBC rates.
Possible ways to promote the Incentive Schemes
The SDI scheme’s requirement to have two adjacent property owners to propose a redevelopment scheme, though with good intentions, may also deter developers from pursuing the scheme. Such a partnership of two owners can either be possible with the property owners being from the same entity, or both individual owners sharing similar goals to rejuvenate their properties as well as the surrounding precinct. To encourage partnership and public realm refresh among property owners, URA could consider introducing the bonus GFA regime, such as having a ‘light touch’ on GFA computation for other development uses that promote quality public spaces, pedestrian network and public infrastructure sophistication, adaptive re-use of heritage buildings and environmental sustainability.
Both CBDI and SDI schemes can also be improved by establishing greater clarity on the criteria — offering more information on the planning intention of the locality and wider precinct, such as possible composition mix for Commercial & Residential proposed uses; and providing more masterplan visualisations and a clear illustration of the potential tangible and intangible benefits from the positive impact of potential land use schemes. These initiatives could open up the imaginative bandwidth of developers, thus stimulating the conceptualisation process and expedite project feasibility evaluation, cutting down the lead time for design development and planning approvals.
Expanding the scope of tangible incentives for developers who embark on such schemes should also be considered. One way could be co-sharing of construction costs between the private developer and the public sector for public infrastructure works arising from the redevelopment scheme. The scope for additional bonus GFA under the Built Environment (BE) Transformation GFA Incentive Scheme should also apply for CBDI and SDI proposals, since these proposals are also required to comply with stipulated ITM outcomes in the areas of digitalisation, productivity and sustainability.
The author heads the Consultancy department, more about Alice here.