Desperate developers slash prices by 15% to dodge hefty government fines

ABSD could erode profits by up to 50%.

Local developers desperate to move inventory have slashed prices by 15% to avoid paying hefty government fines.

According to CLSA, the pace of price cuts could accelerate as developers struggle to avoid paying applicable extension fees and stamp duties for unsold inventory beyond a stipulated timeframe.

Under the Residential Property Act, developers will have to pay an Additional Buyer Stamp Duty of 10% for land acquired after December 2011 and 15% for land bought after January 2013.

The fee could be cancelled if the developer signs an agreement to construct and sell all units with the stipulated project-completion period of five years, or four years for ECs.

Developers that fail to meet the stimulated project-completion period will have to pay the full ABSD with interest, which CLSA says could erode profits by up to 50% for some luxury-focused developers.

“Given the buildup of inventory among developers and the requirement to pay an extension premium for QCs, developers may adjust pricing for existing launches in order to move inventory,” said CLSA.