Property developers are launching leasehold developments on freehold sites to secure future land banking opportunities.
While this enables developers to launch units at more competitive prices, analysts warn that this may impact future en bloc proceedings on these sites.
Property developer Far East Organization has launched four leasehold projects on freehold land, including The Shore Residences and Cabana.
Analysts said developers are able to launch these developments at more competitive prices, which are 10 to 15% lower than freehold properties in the surrounding area.
Developers will also be able to lay claim to these sites after the lease expires.
Donald Han, special advisor at HSR International Realtors, said: "A lot of developers who have been well-entrenched in the market would like to keep that as a safeguard, so they have continuous land banking opportunity to develop."
According to the Singapore Land Authority, owners of freehold sites have the right to sell part of their tenure in leasehold portions and retain the reversionary interest.
Analysts warn that investors who are considering future en bloc opportunities may want to think twice about investing in such developments.
Mr Han said: "When you are looking into the leasehold tenure, when it is run closer to your 30 to 40 years, it is harder to get an opportunity to extend the lease unless you negotiate directly with your superior land owner."
Analysts said that leasehold developments on freehold sites are already common in commercial projects such as Ocean Financial Centre in the Central Business District.
On the residential front, market watchers said developers may well consider launching 30-year leasehold projects on their freehold sites to cater to the demands of an ageing population.
Source: Channel News Asia