Understanding Qualifying Certificate (QC)
UNDERSTANDING QUALIFYING CERTIFICATE (QC) FOR DEVELOPERS
Buyers are always picking on properties that are near QC deadlines, hoping to get a good bargain from desperate developers who wants to clear units and not pay the hefty extension charge. However, not all developments are subjected to QC. So what actually is QC? Which developments are subjected to QC? Which developers has navigate around QC and bought themselves more time? Below are 5 things you need to know about QC.
1. What are the Conditions of QC?
a. Developers subjected to QC are given 5 years to complete construction and obtain Temporary Occupation Permit (TOP).
b. All units developed have to be sold within 2 years of the TOP date.
c. Developer is not allowed to lease out any unsold units.
d. Extension charges applies for extension of TOP or extra time to sell remaining unsold units.
2. Who needs to obtain QC?
a. Under Residential Property Act, Foreign Housing Developers with one or more non-Singaporean shareholder and director are subjected to QC.
b. All public listed developers needs to obtain QC.
3. Who are not affected by QC?
Developers who are not as described in para 1., that have bought land from Government Land Sales (GLS) programme are not subjected to QC. They could lease out their units on TOP. 2 such prominent developers are Far East and Keppel Land. Popular developments not subject to QC are Marina One Residences, DUO Residences, Corals at Keppel Bay, The Trilinq, etc.
4. Developers’ solutions around QC extension charges?
a. Privatise and de-list from SGX. SC Global Developments adopted this method for their unsold properties. This solution is applicable if company meets the shareholder/director criterion.
b. Bulk sale of unsold units to an investment holding company. Public company Hiap Hoe Group is doing this way for Treasure on Balmoral. However, Additional Buyer Stamp Duty (ABSD) applies for this method. We will be seeing more developers adopting this method because on the long run, they may gain even more.
5. How to benefit from QC regulations?
I will always say ‘low price does not mean cheap, high price does not mean expensive’. This is one important thing to consider when it comes to buying a house. A usual trend of sale would be the lower-priced units selling before the higher-priced ones, and the higher-priced ones usually enjoys better rental demand when all things being equal. So when QC deadline drawing closer, developers are usually more flexible in price negotiations.
For those lower-priced units that are available at the time when QC is approaching deadline, it is usually due to poor facing or layout. Be careful when investing into these units because they may not have good rental demands. Also, low-priced units may have undergone more rounds of price increament before doing the final drop. So you might not be buying that cheap after all.