INDUSTRIAL LAND LEASES (New rules)

Mr Robert Chua Teck Chew asked the Minister for Trade and Industry, regarding the new rules on industrial land leases announced recently, whether he will provide further details on (i) how many leases of the Jurong Town Corporation, Housing and Development Board and Port of Singapore Authority will be affected by the new rules in the next 15 years; (ii) how much additional investments must be committed by a current lessee in order to obtain an extension to the lease; (iii) what is the formula for calculating the new rental rates for an extended lease; and (iv) what are the terms and conditions that allow a current lessee to assign an approved extended lease to another party prior to the expiry of the current lease.

The Minister of State for Trade and Industry (Mr Goh Chee Wee) (for the Minister for Trade and Industry): Mr Speaker, Sir, there are a total of 771 JTC, 58 HDB and five PSA industrial leases expiring over the next 15 years.

The rationale for allowing earlier extension of lease is to facilitate planning for new fixed investments by the industrialists. It is to assure them of a lease extension so that the total lease remaining is long enough for them to amortise their investment, get a reasonable return on the investments and to obtain financing.

To qualify for earlier lease extension, industrialists must make new investments. The length of extension will depend on the amount of new investment that they are going to put in. The existing investment in buildings on the land will also be taken into account.

Lessees who are granted extensions of lease will continue to pay the land rent as provided for in their existing leases until their expiry. The land rent will only be revised to the JTC's prevailing posted rental rates at the commencement of the renewed lease term.

However, to cushion the impact of higher rents when the renewed lease term comes into effect, JTC will help its lessees by giving rental rebates over the first three years of the renewed lease on a reducing basis. In other words, rentals will be adjusted gradually over three years to the full JTC posted rentals only in the fourth year.

While we allow leases to be renewed early enough to encourage companies to invest further, we must have adequate safeguards against land speculation. The value of a longer lease must not create an opportunity for speculation by the lessee, for example, by assigning the lease once it has been extended.

To discourage speculation, the renewed lease term will be forfeited if the lessee assigns his lease before the additional investment is put in. After the investment is in place, the lessee can assign the remaining portion of his existing lease and renewed lease term. However, the concessionary premium for the "old" buildings will be withdrawn if the lessee assigns his lease within three years of putting in the new investment. "Old" buildings are defined as those buildings that are already on the land at the time the renewed lease term is granted.