THE Singapore Land Authority (SLA) is studying the feasibility of a longer leasehold period – such as 30 or 60 years – for an entire black-and-white bungalow estate, so that a private developer can become the master-leaseholder, said Second Minister for Law Edwin Tong on Monday (Jul 3).

He was one of four ministers who addressed questions from Members of Parliament on the Ridout Road bungalows leased to Law Minister K Shanmugam and Minister for Foreign Affairs Vivian Balakrishnan.

As the master-leaseholder, a private developer can “rejuvenate the entire estate and reap the benefits over the longer lease period”, Tong explained.

In his speech, Tong laid out SLA’s management approach for black-and-white bungalows. Over time, the use of these colonial properties has been broadened “to meet the evolving needs of Singapore”, with the need to balance between protecting heritage properties and redeveloping them.

While some bungalows have been retained for residential rental, others have been demolished as a cluster to make way for newer developments, or repurposed for different uses, such as commercial and retail space.

However, for black-and-white bungalows in areas zoned for landed properties – such as Ridout Road and Nassim Road – there is limited room for redevelopment. The cleared land can only be used for similar low-intensity housing, not for industrial or commercial purposes or public amenities.

A NEWSLETTER FOR YOU

Tuesday, 12 pm

Property Insights

Get an exclusive analysis of real estate and property news in Singapore and beyond.

Sign Up

Limited tenant pool

There is also a limited tenant pool for black-and-white bungalows, said Tong.

Incoming tenants often have to undertake capital expenditure to retrofit the properties to modern standards. Yet, unlike owners, they can only enjoy the benefits of retrofitting for the length of their tenancy. They must either risk a higher rental price upon renewal, or choose not to renew and write off their expenditure.

To address the limited pool of tenants, SLA has tweaked the tenancy structure to provide more flexibility.

For example, where tenants are willing to commit larger sums to enhance the properties, SLA is prepared to grant tenancies of 5+4 years, instead of 3+3+3. This provides a longer lead time to recover the amortised cost.

Tong said the idea of letting private developers become master-leaseholders is another way in which SLA seeks to “maximise the opportunities for the state to benefit from these properties”.

He also addressed MPs’ questions on the bungalows rented to the ministers. Asked by Non-Constituency MP Hazel Poa if SLA was aware that the bid for No 26 Ridout Road was by Shanmugam, Tong said that while SLA knew, its valuation department and the valuer who assessed the guide rent did not know.

As the Corrupt Practices Investigation Bureau (CPIB) established in its review, the valuer did not even know that Shanmugam and SLA had settled on a rent of S$26,500, added Tong.

On the preparatory works done by SLA, which cost more than S$500,000 for each property, Tong provided additional details.

For No 26, SLA engaged a consultant with experience in dealing with heritage properties, who identified necessary works. These were for structural items such as timber beams, rafters and columns, and other heritage features, and cost about S$375,000 out of the total S$515,400 incurred.

A similar inspection was done by an external consultant for No 31 Ridout Road, leased to Dr Balakrishnan. Proposed works included extensive works to the roof, which was assessed to be in a bad state, as well as other heritage features. These cost around S$452,000 out of the S$570,500 total.

SLA also did the usual sprucing up works to ensure properties were habitable. For No 26, these cost around S$140,000 and included painting, pest control and removal of mould. For No 31, the works included general repairs to the staircase or perimeter of the house, fixing windows, painting and pest control, totalling S$118,000.

Details were given of the ministers’ own expenditure. Over S$400,000 was spent by Shanmugam on improvements such as air-conditioning, a car park shelter, a swimming pool, garden lights as well as adding trees and other planting.

Dr Balakrishnan undertook improvement works with a cost of around S$200,000, including installing air-conditioning, upgrading the toilets and building a pavilion as an extension of the property’s garage. URA approval was obtained for the pavilion.

All improvement works become the property of the state when the property is returned to SLA.

Concluding, Tong said that “there was every reasonable, commercial basis for SLA to have entered into these transactions”.

“The terms of both leases were standard and did not contain any unusual clauses. They were entirely at arms-length, and did not deviate from any usual processes,” he said.

Master lessees should have the autonomy to decide on the uses within the black-and-white bungalow estate for them to minimise commercial risk, said property watchers.

Savills executive director of research and consultancy Alan Cheong said that a master lessee of a 60-year lease may be incurring “too much” of a risk due to its duration. He said: “Developers will have to be given flexibility in what the land can be used for, such as residential or commercial use. Otherwise, the better option will be a 15-20 year lease, maximum.”

The attractiveness of the scheme would depend on the terms and conditions, and the location of these bungalows, Cushman & Wakefield’s head of research for Singapore and South-east Asia Wong Xian Yang said. For example, whether there are any restrictions on property use and tenant mix, as well as whether the transfer of master lease is allowed.

Chia Siew Chuin, JLL’s head of residential research and consultancy, pointed out that the involvement of master lessees potentially extends the reach of such properties to those who are seeking to stay in a bungalow, but are ineligible to purchase one. The full suite of residence services such as concierge and housekeeping can be provided by master lessees as well.

Developers with experience in re-adapting, retrofitting and subletting as a master lessee might be keen on a long master lease. The LHN Group is one such player, JLL’s Chia said. “It also provides developers another playing field beyond greenfield developments built for sale.”

But most property developers may find it too much of a hassle to manage a black-and-white bungalow estate, Savills’ Cheong said. Co-living space operators may be keen instead.

The absence of leases of similar length, the rarity of black-and-white bungalows as well as the variation in the rental of individual properties may make it difficult for SLA to value such leases, he added.

In a separate ministerial statement, Senior Minister Teo Chee Hean said that public service officers “who have access to, or are involved in, leasing and valuation matters” will have to declare that they have taken steps to prevent any conflict of interest, before they can rent government properties managed by their agencies.

The Public Service Division is working with the relevant ministries and statutory boards to introduce this requirement for officers who have access to privileged information, can influence outcomes, or both.

“The prime minister will also review the declarations required for property transactions for ministers and PAP Members (of Parliament),” Teo added.

This is on top of existing codes of conduct that “adequately cover any potential conflict of interest” that could arise, including in the Ridout Road case, he said.

In his speech, Teo reiterated the CPIB’s conclusion that there was “no evidence of corruption or criminal wrongdoing” in the Ridout Road transactions, and his own report’s finding that there was no conflict of interest.

CPIB’s investigation included interviews with the ministers and their spouses; former and current public servants; property and managing agents; and others who knew of the transactions. Evidence was also taken from phone records, as well as WhatsApp and text messages.