URA to review guidelines on private enclosed space

THE Urban Redevelopment Authority (URA) has been directed to review and fix guidelines on private roof terraces and private enclosed space on ground floors that allow developers to profit off bonus floor area that is given to them for free.

National Development Minister Khaw Boon Wan said in a blog post yesterday that super-sized executive condominiums (ECs) units were offered and snapped up by buyers at some recent launches who did not appear to be from the sandwiched class.

"Understandably, there was public indignation at such deviations (both by some developers and some buyers) from what we had intended ECs to serve," he wrote.

Developers explained that such units were priced lower and were in the minority, Mr Khaw added.

For example, recent reports put the largest penthouse at the Citylife@Tampines EC project at about $470 per square foot (psf), while its other smaller and more typical units transacted for upwards of $700 psf.

"I was initially baffled by this. Why would the developer short-change itself? Why not sell more normal-sized EC units at a higher dollar psf, and make more profit?" Mr Khaw wrote.

He eventually found out this was not the case.

Currently, developers do not have to pay development charges for outdoor spaces that are open to the sky, as they are not considered part of gross floor area (GFA). This exemption applies to all developments, including ECs.

Developers can build either private or communal open spaces. This is aimed at encouraging more outdoor space for residents to enjoy, Mr Khaw noted.

However, when developers price a unit, they offer the entire space (including the outdoor space) for sale and make additional profits.

Mr Khaw said that the creation and sale of super-sized private roof terraces has become more prevalent, and has extended to the ground floor where "private enclosed space" (PES) is sold.

"Developers selling off free space to make additional profit for themselves is not improper under current URA rules," the minister pointed out.

"But as more developers do so, with larger private roof terraces and PES, communal space in the development that benefits all residents will correspondingly shrink."

These open spaces also cannot be covered up or enclosed, he added, which could disappoint buyers down the road.

A URA spokesman said that it is currently reviewing the guidelines on PES and private roof terraces, and will announce the details once the review is completed.

The strong demand for ECs means that a ban on big units ensures "EC housing subsidies go to the appropriate sandwich class".

For developers, the same demand will sustain sales, and the review will free up space to provide more smaller units which fetch higher psf prices.

But some analysts expressed doubts over the review.

Source: Business Times –8 January 2013