Ownership of Landed Residential Properties

In Singapore, Residential Properties are generally classified into three categories: Landed Properties, HDB Properties and Condominium or Apartments. As mentioned in my previous post (Buying a completed private property in Singapore), out of the three types of residential properties, only Condominiums and Apartments are non-restrictive and are usually readily available to both Singaporeans and foreigners alike.  HDB apartments are public housing made available by the government to provide affordable housing for Singaporeans as well as Permanent Residents only. Landed properties are residential properties, which include vacant land, detached houses, semi-detached houses, bungalows, terrace houses, buildings of less than six storeys and any other land gazetted for residential purposes, that are almost exclusive to Singapore citizens with restrictions on foreign ownership.

The ownership of landed residential properties in Singapore is governed by the Residential Property Act. Under the Act, a foreign person means any person who is not any of the following:

• Singapore citizen;
• Singapore company;
• Singapore limited liability partnership; or
• Singapore society.

Individuals or entities that do not fall into any of the above-mentioned categories are totally restricted from owning landed residential property unless approval is obtained from the Controller of Residential Property. Approval is also required if the foreigner is a beneficiary or is entitled to receive landed residential property by way of gift, bequest, succession or inheritance. In the case where approval is not granted by the Singapore Government, the foreign beneficiary is legally bound to sell such properties to a citizen or approved purchaser within a period of ten years from the death of the previous owner.

So, one may ask, how can a foreigner own a landed property in sunny island Singapore?

There are a few exceptions, with written approval obtained, to foreign ownership of land.
The exceptions are as follow:

• Singapore Permanent Residents (SPR)
•  Foreigners who are of economic benefit to Singapore or who are able to make economic contributions to Singapore
• Foreigns who possess professional qualifications or experience which are of value or benefit to the economy of Singapore.

A foreigner in any of the above categories can apply to the Controller of Residential Property for written approval. Download and complete Form A, submit to Land Dealings (Approval) Unit at Unit 55 Newton Road #12-01 Revenue House Singapore 307987, together with income tax assessment statements, professional qualifications, marriage certificate, reasons for acquiring the residential property, and any other relevant supporting documents as stated in Form A. The application takes approximately 3 months.

If approval is granted, the foreigner is to undertake that the property, with a minimum occupation period of 5 years, is to be used for the purpose of residence and not for any other income-generating purposes. The approval has a validity of 6 months from the date of approval. It is important that a foreigner include the following clause in the purchase contract of the desired property or Option to Purchase.

“This sale and purchase is subject to the Purchaser obtaining the approval from the Land Dealings (Approval) Unit before completion. In the event that such approval is not granted, the sale and purchase herein shall be annulled and all monies paid shall be immediately refunded free of interest and neither party shall have any claim against the other thereafter.”

So, one may ask again, how can a foreigner, who does not fall into any of the categories mentioned above or does not want to go through all the hassle, get to reside in a landed property in Singapore?

The best solution, RENT ONE. This is almost non-restrictive and hassle free, except that the tenancy should not exceed 7 years.

Alternatively, look towards the landed residential properties in Sentosa Cove where the restrictions are less stringent. Foreign individuals who wish to buy a landed property in Sentosa Cove can obtain fast track approval from Singapore Land Dealings Unit, with no minimum occupation period required. Of course, when you think of Sentosa Cove, you’d think of the extravagant living as well as, needless to say, the high price tags that come with the properties.

Buying a completed Private Property in Singapore

There comes a time in life when you are ready to make the biggest purchase of your life for the first time. It can be both exciting and daunting at the same time. Besides being the biggest financial commitment for most Singaporeans, it also means a long-term commitment which should be meticulously and carefully planned and executed.

Buying a home involves a tedious process of planning your finances, calculating your budget and affordability, seeking out the perfect home, numerous rounds of bargaining and negotiations, getting the most attractive mortgage rates and the list goes on. What you can afford will depend on your income, existing debts, available savings and your loan eligibility.

Currently, there are three main categories of residential properties in Singapore: Landed, Housing Board Development (HDB) apartments as well as Private Apartments. They possess significant differences especially in terms of buyer’s eligibility. Landed property is generally restricted to only Singaporeans (foreigners have to obtain specific approval from the government) and HDBs are public housing available only to Singaporeans and PRs with many restrictions in terms of purchase and sale. Private apartments, either classified as apartments or condominiums, are a popular form of accomodation for many as they are categorised as non-restricted residential properties and as such, are usually less stringent in terms of eligibility for ownership in comparison to the other two categories of residential properties. Now, going into the topic for this entry, what are the processes involved in the purchase of private properties in Singapore?

STEP ONE: APPOINT A PROPERTY AGENT

Real estate agents are available to you for a reason; we have gone through rigorous trainings and examinations and are equipped with the knowledge and experience to provide the advice and know-hows of navigating the tedious path towards occupying that dream home of yours. A good agent can take off your hands the need to search, shortlist, negotiate and bargain and provide a proper legal and financial advice after purchase. Of course, there are bound to have black sheeps in every profession but in general, we work hard to make that 1 or 2% commission granted to us, usually by the seller, worth the money spent. Be frank and open to your realtor about your expectations, such as budget, location and size. Having an open relationship with your agent will direct you to your ideal home very quickly and fuss free.

STEP TWO: CHOOSE, FIND AND BARGAIN

Based on your affordability and needs, your agent will get down to searching and arranging for viewings.Take your time to inspect each and every unit and make each session worth your precious time. Feel free to ask questions regarding anything that may concern you. No question is a dumb question. Common questions are the facing of the unit (west facing are generally less popular with most people), the age of the development, the number of owners before you, nearby amenities etc. Next, once you have your heart set on a particular unit, relate to your agent about your desire and let the agent carry out the negotiations. This is usually a very trying and lengthy process; sellers want to get a price as high as possible and you want a price as low as possible. Be firm on your affordability.

This is probably the biggest item you will be buying for the first time in your life; ensure you are completely comfortable and sold before you agree to the purchase.

STEP THREE: OPTION TO PURCHASE / OFFER TO PURCHASE

The Option To Purchase (OTP) gives the buyer a 14-day exclusivity period to decide on purchasing the intended property. Upon signing the OTP, 1% of the purchase price is given to the seller as the ‘option fee’ or good faith deposit. Another 4% or 9% must be returned with the agreement to the seller should you decide to proceed with the purchase within the stipulated deadline, after which the 1% deposit will be forfeited.
Upon exercising the option, the OTP now becomes the Sales & Purchase (S&P) agreement.

STEP 4: MONEY MATTERS

Compare interest rates and take note of fine prints and terms when choosing your finance scheme and institution. An on-site valuation will be done by a bank once option fee has been given.

STEP 5: COMPLETION

Most agents can refer you to a reputable solicitor or consider engaging the bank’s panel of lawyers who will handle everything from here on. Within 8 to 10 weeks, he or she will complete the sale by lodging a caveat on the property, coordinating with the financial institutions, CPF board (if applicable) and preparing the necessary documents. A solicitor’s fees (usually about $3000) will be borne by you.

Within 14 days upon exercising the OTP, Buyer’s Stamp Duty (BSD) and Additional Buyer’s Stamp Duty (ABSD), if applicable, will be payable to Inland Revenue Authority of Singapore (IRAS). For stamp fee payable, please read Money Matters on Purchase of Completed Private Properties.

STEP SIX: INSPECTION

If you are purchasing the property with an existing tenancy, obtain a copy of the Tenancy agreement (TA) and Inventory List. Upon completion, any security deposit held by the seller is transferred to you, who is now the new landlord.

If you wish, include in the OTP for a final viewing before completion, to check the fixture and fittings are in good condition and left behind as promised by the seller. On completion date, the keys are handed over by the seller’s solicitor and all outstanding monies are settled by yours. As the new owner (hooray!), all maintenance fees, property taxes etc take immediate effect on the date of completion.

STEP SEVEN: SCREAM WITH JOY

Congratulations, you are now the proud new owner of your new pad/investment!