40% property tax rebate

Source : Straits Times - 23 Jan 2009

OWNERS of industrial and commercial properties will get a 40 per cent tax rebate, worth $800 million, from the Government this year.

The rebate is part of the $20.5 billion resilience package announced by Finance Minister Tharman Shanmugaratnam yesterday to help Singapore’s companies cut costs and save jobs.

He said: ‘The Government strongly urges landlords to pass on the benefits of this rebate to their tenants.

‘Landlords should also consider further adjustments of rental and more flexible leasing arrangements and payment terms, in light of the severe downturn in demand faced by their tenants.’

Small businesses are feeling the impact of high non-negotiable rental contracts signed in boom times and falling receipts due to the recession.

A Straits Times check with 45 small- and medium-sized retailers and restaurant owners found that five had wound up their businesses in the past six months, four had shut at least one branch and seven will close shop when their leases expire this year.

More than 130 small businesses closed down last year, according to recent data from the Ministry of Finance, a nearly 25 per cent jump over 2007 and the first annual increase since the dot.com bust seven years ago.

After doing the maths, president of the Association of Small and Medium Enterprises Lawrence Leow said the rebate would mean tenants can expect an estimated 4 per cent adjustment in rents if private landlords choose to pass on the savings.

‘But it might not even be that, because landlords might keep some of the rebate for themselves,’ he said, adding that rent adjustments are likely to vary from landlord to landlord.

He pointed out that the amount passed on would depend on factors like landlord-tenant relationship and the demand for a particular shop space.

Others are more optimistic.

Singapore Retailers Association president Jannie Tay is hopeful that this measure will translate into a 30 to 50 per cent fall in rental rates for businesses.

The association has been pushing for a rental reduction since the financial crisis hit last September. But, she said, landlords have resisted the push.

‘We do know that if there is a drop in property tax, the landlords are willing to discuss the reduction of rents with us,’ she said.

Mrs Tay said rental rates for retail outlets had shot up as much as 80 per cent in the past three years, pinned on expectations of Singapore becoming a boom town with the opening of the two integrated resorts and new shopping malls coming up along Orchard Road.

But since last September, sales have nose-dived and the high rents are slowly bleeding retailers dry, she added.

The association is meeting individual landlords in the coming weeks to see how they can negotiate a better deal for retailers.

At least one major private landlord has signalled its intention to pass on the whole rebate.

Singapore’s biggest mall operator CapitaLand will pass on the property tax rebate in full to its retail tenants in properties owned by CapitaLand Retail and CapitaMall Trust.

These include tenants in malls such as Bugis Junction and Tampines Mall.

Tenants of CapitaLand’s wholly-owned commercial and industrial buildings as well as the portfolio of properties owned by CapitaCommercial Trust will also benefit fully from the rebate.

A company spokesman said CapitaLand ‘welcomes the Government’s comprehensive slew of property-related Budget measures’ in the current ‘challenging economic climate’.

Two other major landlords, who did not want to be named, said that while it was too soon to make an announcement, a rental reprieve for their tenants was definitely on the table.

‘The question now is one of quantum - how much (of the) savings will be passed down,’ said Mrs Tay.