These new changes described in the circular is to be adopted by 4 government agencies: URA, Singapore Land Authority (SLA), Building and Construction Authority (BCA) and Singapore Civil Defence Force (SCDF).
Under the new standardised definition, all strata areas will have to be included as gross floor area(GFA), which is limited by the Master Plan plot ratio for the site.
Currently, such aircon ledge spaces make up around 4% to 5% of the total saleable area of the private residential unit which buyers pay for as residential property developers sell the aircon ledge spaces as part of the payable strata area of condo units. But due to current computation, this aircon ledge area is not charged by the government and therefore is actually considered free of charge to developers.
Throughout the past few years, we have seen many cases of homeowners complaining about oversized aircon ledges - some almost the length of a bus - in newly built condominiums all across Singapore casting the spotlight on this loophole that allows developers to build them without having them counted as part of the gross floor area (GFA). Yet, developers are allowed to charge home buyers for that same space.
Some property analysts estimate that each year, Singapore's private property owners pay approximately $800 million to developers for air-con ledges. Many feel that it is time for that the authorities take away the GFA exemption for these aircon ledges - just as what the authorities did for planter boxes and bay windows around 13 years ago when the Urban Redevelopment Authority made the move on 1 Jan 2009 after noticing that some developers had been exploiting the loophole for profit.
Real estate professional Kiwi Lim says developers usually use their free aircon ledge space to average out the overall cost price per square foot of the whole apartment to offer a lower overall per square foot selling price to buyers after taking into account the free aircon ledge space that the government does not charge developers for.
If this new rule kicks in for future Government Land Sale (GLS) land parcels, we may see developers in a dilemma. They need land parcels to continue building properties in order to keep their tens of thousands of staff employed and therefore they have to keep bidding and securing more land parcels. Should they continue to compete and bid higher for the GLS land parcels to secure more land for new projects to bring in revenue? If they hesitate to pay higher prices for the GLS land parcels, they may secure no new projects and may need to retrench. If they bid for the new GLS land parcels, they will have to charge higher per square foot prices for future condo projects because they no longer have the free aircon-ledge buffer space to bring down their average per square foot price.