How Will Singapore Budget 2019 Impact the Real Estate Industry?

Christine Li • 20/02/2019

Finance Minister Heng Swee Keat unveiled Budget 2019 on 18th February. Budget 2019 focuses on strengthening the capabilities of both corporates and individuals to prepare them as the country moves towards an innovation-led economy in the next decade. There are no specific announcements on real estate; instead the Finance Minister focuses heavily on the fundamentals of Singapore’s growth story – pivoted on the vision of a Smart Nation, where the seamless integration of new digital technologies on top of digital infrastructure will enable the development of novel solutions to address future challenges and drive economic growth.

Extension of Tax Concessions for S-REITs

In a move for the continued promotion of Singapore as a hub for REITs in Asia, the existing income tax concessions for S-REITs, which were previously slated to end after 31 March 2020, will be extended until 31 December 2025.

The tax exemption on S-REITs distributions received by individuals, and the concessionary income tax rate of 10% for S-REITs distributions received by non-resident non-individual investors will be maintained.

In addition, S-REITs will also continue to enjoy tax exemption on qualifying foreign-sourced income, such as dividend income, of overseas property acquired on or before 31 March 2020.

Furthermore, GST remission for S-REITs and business trusts will be extended until 31 December 2025, which will enable S-REITs to continue claiming GST on their business expenses. The extension of GST remission until 2025 is especially timely, as there is a planned GST hike of two percentage points sometime in the period of 2021-2025.

The extension of the tax concessions for a further five years will provide the market with greater certainty, and promote the listing of foreign REITs in the local bourse.


Singapore Head of Research Christine Li speaking to Money FM, 20th February 2019

Reduction in Foreign Worker Quota for Services Sector

The government is concerned that foreign worker growth in the services sector will be unsustainable in the long run. There is also a desire to raise productivity in the labour-intensive F&B and retail segments.

Therefore, the dependency ratio ceiling (DRC) for the services sector will be reduced from 40% to 38% on 1 January 2020, and subsequently to 35% on 1 January 2021, according to Budget 2019. The S-Pass sub-DRC for the services sector will also be reduced from 15% to 13% on 1 January 2020, with a further reduction to 10% on 1 January 2021.

While the phased reduction will alleviate some of the pain, this policy move will result in higher labour costs for retailers and impact landlords’ ability to extract rental increases during upcoming leasing negotiations. However, the move will enhance the productivity and resilience of the services sector in the long-term due to the anticipated use of increased automation, revamping of work processes, and up-skilling of workers.

Pilot of Digital Services Lab

The e-commerce and logistics sector was given another boost with the creation of the Digital Services Lab and continued efforts to help home grown companies digitise further. For one, retailers stand to benefit from better last-mile logistics support by partnering with third party delivery companies to enhance the whole customer experience including same-day deliveries. Landlords will also be able to tap into large scale automation such as robotics and Industry 4.0 to manage operations at the loading bays of malls to prevent traffic congestion.

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