Govt won’t intervene as loans still available to property developers

Source : Channel NewsAsia - 13 Apr 2009

The Singapore government will not step in to underwrite existing bank loans to property developers for now.

This is because loans and other financing options are still available despite the current credit crunch, said National Development Minister Mah Bow Tan in Parliament on Monday.

The economy is facing a difficult recession, but Singapore property developers may have been spared the brunt of the current credit crunch.

The National Development Ministry says total loans to the building and construction sector grew by 22 per cent in the 12 months to February this year.

The majority of these loans went to developers.

Although loans growth to the construction sector has tapered recently, it is still at the relatively high level of S$50 billion.

So, it may be premature for the government to intervene.

Mr Mah said: “We do not think the current situation warrants the government stepping in as guarantors for loans to developers.

“Banks are still lending to developers, and they are better placed to assess the risks than the government.

“Besides bank loans, a number of developers have also managed to raise capital through other means such as rights issue or private placement.”

Meanwhile, there will be no freeze in rentals for tenants of HDB commercial and industrial properties.

The landlord - the Housing and Development Board (HDB) - says a rent freeze is not equitable and will cause HDB rents to “disconnect” from market realities.

But HDB will monitor the situation closely.

Grace Fu, Senior Minister of State for National Development, said: “In recognition of the prevailing market conditions, the HDB has reduced the market rents by 5 per cent since January 2009.

“For the small number of tenants who face substantial rental increases in spite of these measures, HDB will stagger the rent increases over the tenancy term.”

These are on top of measures introduced as part of the government’s Resilience Package in January, which include property tax and rental rebates.

The government has said more will be done if needed.