SINGAPORE - Developers are paying "almost nothing" in extension charges this year, said Singapore Land Authority chairman Lim Sim Seng on Monday (April 30).

It is an indication of the active property market which includes purchases of replacement homes by those who sold en bloc, said Mr Lim, who was speaking to the Business Times on the sidelines of the DBS Group Holdings' first-quarter results briefing. Mr Lim is also DBS Bank Singapore country manager.

The previous year's extension charges or qualifying certificate (QC) penalties paid by developers amounted to about S$50 million, said Mr Lim.

QC rules require all foreign and listed developers to finish building their projects within five years of acquiring the site; they also have to sell all the units within two years of obtaining their temporary occupation permit.

If they fail to meet this deadline, the penalties are punitive. They incur extension charges at 8 per cent of the land purchase price pro-rated on the number of unsold units in the first year; this goes up to 16 per cent in the second year and 24 per cent a year in the third and subsequent years.

The purpose of the QC is to ensure that foreign companies proceed to complete the development and sell off the completed units in the development and not speculate in and hoard residential land.

Fortunately for developers, private home sales are booming. Last week, the Urban Redevelopment Authority said the overall home price index rose 3.9 per cent in the first quarter of 2018, handily beating flash estimates of 3.1 per cent.

This marks the steepest quarter-on-quarter gain since Q2 2010, when private home prices climbed 5.3 per cent.