Recent years has seen a gradual inclination towards commercial real estate investment in Singapore as real estate investors seem to prefer commercial properties more that residential ones. One of the primary reasons leading to this development has been the move made by the government to prevent a bubble in the residential real estate market.
One of the best aspects about commercial real estate investments is reduced tax payments. Commercial property owners do not need to pay Seller’s Stamp Duty (SSD) or Additional Buyers Stamp Duty (ABSD) when selling or buying commercial real estate respectively. Moreover, even foreigners do not have to face any restrictions from the government while buying, occupying or selling commercial properties in Singapore. There are, however, a few important things to understand and consider before purchasing commercial real estate, more so if the buyer is a beginner in the commercial real estate scenario of Singapore.
CPF cannot be used to finance a commercial property purchase
Individual buyers cannot utilize the funds from their CPF or Central Provident Fund Ordinary Account to finance their commercial real estate purchase. In other words, the money in the CPF account of the buyer cannot be utilized to pay neither the down payment amount nor the monthly installments. The down payment must be paid by the buyer entirely in cash, while buyers can obtain bank loans to pay the remainder of the property price.
The monthly installments for the mortgage can be paid back through the income made from the property. This income can be in the form of business generated revenue or the rental income generated from the property.
Property Tax and Vacancy Refund
Commercial real estate owners must pay a property tax to the government, and the amount of the tax is a flat 10 percent of the total value of the property. However, in case the owner is unable to find a tenant to occupy the property and gain rental income, or in case it lies vacant, the owner is eligible for a Vacancy Refund. In this case, owners can claim a full refund of the property tax.
Loans
When buying a commercial property in projects like the Tai Seng Point Singapore, buyers have to face much austere eligibility requirements for obtaining loans than what they would have to face when buying residential properties. A buyer is eligible to apply for a loan amount of up to 80 percent of the total value of the property, regardless of whether they have any pending loans or not. The decision to approve the loan lies solely with the banks in question. Banks also tend to have more stringent regulations for properties that are purchased with rental income as the primary objective.
Buyers who purchase a property in complexes like the Tai Seng Point in order to conduct business will have to face lesser stringent regulations when applying for a loan. The tenure of the loans obtained can be a maximum of 30 years, but loaners are open to clearing up their mortgages before the tenure-end date.
Maryann Wilson has worked with multiple commercial projects like the Tai Seng Point Singapore in a career spanning over a decade, and now helps novice investors with commercial property investments on properties like the Tai Seng Point.