The new incentives launched to support Singapore’s green building project affects the formula for development charges (DC) calculation.
The Urban Redevelopment Authority and Building and Construction Authority offer a 1% bonus Gross Floor Area (GFA) for the total GFA covered at 2,500 square metres. This bonus goes to developers who construct new home and buildings that achieve the ratings of Green Mark Gold.
As for those project developers who achieve the Platinum rating, 2 percent bonus GFA at 5,000 square metres is granted.
However, the bonus GFA is not free and DC is payable.
The URA also announced an incentive for developers who promote “sky rise” greenery buildings. Extra GFA will be given for existing buildings within the strategic areas of Downtown Core and Orchard.
The extra space can be used as outdoor refreshment areas on rooftop if building owner provides rooftop landscape for developments. However, DC is payable again for the extra GFA.
Unfortunately, DC’s calculation since the change of its formula last July 2007 largely affects the attractiveness of the bonus GFA. The current formula for DC calculation cuts off 70 percent of the enhanced land value.
The previous formula for DC calculation, which runs from 1985 to July 2007, cut off 50 percent of the total land value. The change in formula was based on 70 percent calculation prior to 1985 revision and it was changed to 50 percent during the recession in 1985.
With the current economic situation of the country, numerous industry players urged the government to reinstate the 50 percent formula. After all, the government cut off the DC rate to 50 percent in 1985 because of the recession and this must also apply now as the country is currently facing the worst economic recession.
Another reason to restore the 50 percent DC formula is that, the enhanced land value must be equally shared between private owners and government instead of forcing developers to shoulder 70 percent of DC. Also, developers must be given enough incentives for the risks that they take in the said project.
Extra reason also arises why the government should return the previous 50 percent DC formula to attract developers to achieve the Green Mark rate for new building and to promote the sky rise greenery programme on islands. The BCA data shows that additional 2 percent to 8 percent is needed to develop new buildings and achieve the highest Platinum standard. The payback period for this project is two to eight years.
Some observers also suggest that if government refuses to restore the 50 percent DC formula, they should at least use the 50 percent formula for computing the bonus GFA.
Having different DC formula for various purposes is complicated and retaining the previous 50 percent DC rate is better, but revision of this formula will take a lot of time, giving developers a lot of money to invest on green building projects.