Govt doesn’t need to guarantee loans to developers: Mah

Source : Business Times - 14 Apr 2009

THERE is no need for the government to step in as a loan guarantor for property developers, even though banks have generally become more cautious about lending to them, National Development Minister Mah Bow Tan said yesterday.

Plenty of credit is still being extended to the building and construction sector, Mr Mah told Parliament yesterday. Data from the Monetary Authority of Singapore (MAS) shows total loans to the sector - with developers accounting for the lion’s share - grew 22 per cent in the 12 months to February.

‘While this growth has tapered off in recent months, total loans to the sector are still at a high level of $50 billion,’ he said. ‘Hence, I do not think the current situation warrants the government stepping in as a guarantor for loans to developers.’

Besides bank loans, some developers have raised capital in other ways, such as through rights issues or private placements, Mr Mah noted.

Also, Budget measures such as the deferral of property tax, rebates and a one- year extension of project completion period will mitigate the impact of tough economic conditions on the industry.

Banks are in a better position than the government to evaluate loans, based on their risk assessment experience and relationships with customers, Mr Mah said. However, he promised to monitor the credit situation closely and, ‘if necessary, we are prepared to introduce further measures to help developers through the current downturn’.

Mr Mah was responding to a question from MP Lee Bee Wah, who also asked about the possibility of freezing rents for all HDB and JTC premises.

In reply, Senior Minister of State for National Development Grace Fu said a rent freeze is not a fair solution to help businesses get through the downturn. It would amount to a varying subsidy because tenants locked in rent at different rates, depending on the market when they signed up, she said.

‘It is also not advisable for HDB rents to be different from market realities,’ Ms Fu said. ‘A better approach to help businesses during the downturn is to provide rent rebates.’

She was referring to 15 per cent rent rebates starting in January this year for companies operating in HDB, JTC, Singapore Land Authority and National Environment Agency premises. HDB has also revised rents 5 per cent down since January, she noted. And for the small number of tenants who face substantial rent increases despite these measures, HDB will stagger the increases over the tenancy term.