In an effort to secure future land banking opportunities, property developers are launching leasehold developments on freehold sites, enabling them to launch units at more competitive prices.
But analysts caution that this could affect the developers’ future en bloc plans for these sites.
For instance, Far East Organization has already launched four leasehold projects on freehold land, such as Cabana and The Shore Residences.
These developments were launched at more competitive prices, around 10 to 15 percent lower than freehold properties located on nearby sites, according to analysts. Aside from that, developers could also lay claim to these sites once the lease expires.
“A lot of developers who have been well-entrenched in the market would like to keep that as a safeguard, so they have continuous land banking opportunity to develop,” said Donald Han, Special Advisor at HSR International Realtors.
The Singapore Land Authority (SLA) noted that owners of freehold sites can sell part of their tenure in leasehold portions and retain the reversionary interest.
Hence, analysts warn investors to think twice before acquiring such developments, especially if they intend to explore en bloc opportunities in future.
“When you are looking into the leasehold tenure, when it is run closer to your 30 to 40 years, it is harder to get an opportunity to extend the lease unless you negotiate directly with your superior land owner,” added Han.
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