Hiap Hoe buys up unsold units at luxury condo to avoid hefty fines

Romesh Navaratnarajah31 Oct 2016

Waterscape at Cavenagh-crop

Located in prime District 9, Waterscape At Cavenagh still has 50 unsold units. (Artist’s impression)

To avoid paying additional extension charges for the 50 remaining units at Waterscape At Cavenagh, the developer of the 200-unit freehold residential project in District 9 had no choice but to be acquired by its controlling shareholder.

According to an SGX filing last week, the entire share capital of Cavenagh Properties was purchased by Hiap Hoe Holdings for $31.08 million in cash, which is the revalued net asset value of the unsold units.

However, the properties were appraised by property consultancy Knight Frank as having a market value of $95.47 million on an en bloc basis as at 30 September.

Despite different marketing strategies rolled out by various marketing agents, Cavenagh Properties said it was not successful in disposing the leftover units to external buyers amidst the government’s property cooling measures, such as the Total Debt Servicing Ratio (TDSR) and Additional Buyer’s Stamp Duty (ABSD).

In addition, it has to comply with the Residential Property Act’s Qualifying Certificate (QC) rules, whereby all developers with non-Singaporean directors or stockholders must obtain Temporary Occupation Permits (TOP) for their private housing projects within five years, and sell all units within two years thereafter.

To extend the sales deadline, developers must pay the government an additional eight percent, 16 percent and 24 percent of the land purchase price for the first, second and subsequent years, respectively. The amount is pro-rated based on the proportion of unsold units.

“As the project obtained its TOP in September 2014, the group is guided by the deadline of 23 September 2016 to achieve 100 percent sales. It has since paid a fee of $1.19 million to extend the sales period by six months to 23 March 2017,” the statement said.

However, it went ahead to be acquired by its controlling shareholder as Singapore’s housing market is expected to remain sluggish over the next few months, and the authorities have not provided any clear sign that the cooling measures will be lifted anytime soon.

“The proposed disposal will enable the group to realise a gain of $23.99 million over the carrying value of the properties as at 30 September 2016, while avoiding future additional extension charges of about $1.19 million, $4.75 million and $7.13 million,” it added.


Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg

Nov 07, 2016
How can iras allowed such tax evasion declaring low transaction price when individual are not allowed?

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