What does the latest budget and the rental relief scheme mean for real estate?
While remaining focused on the three Cs – Cash, Costs and Credit, what stands out in the Fortitude Budget is the stepped up emphasis on helping SMEs to combat the cost of real estate rents, in the form of cash grants and a new proposed bill mandating landlords to grant rental waivers to qualifying SME tenants. In total, eligible SME tenants can benefit from up to four months of rental reliefs to be shared equally by the Government and the landlords if the bill is passed by parliament. Although real estate rents do not form a major component of business costs, this will still provide much needed cost relief to SME businesses as they face lost or reduced revenue due to safe-distancing measures. This should help more of them to stay afloat as the fight against COVID19 continues.
Another standout in the Fortitude Budget is the shift from saving jobs to reskilling the workforce. This demonstrates the government’s efforts to provide businesses and workers with a much needed push to transform and prepare for the new norm post COVID19.
Overall, the size and emphasis of the Fortitude Budget in areas not adequately addressed in the earlier budgets should go some way to prolong the lifespan of more businesses and cushion the dent in demand for real estate arising from the protracted fight against COVID19.
Additional information on the Fortitude Budget and the rental relief schemes:
The government announced a generous SGD 33 billion supplementary budget called the Fortitude Budget to help businesses, individuals and households cope with the prolonged disruption to economic activities by COVID19, and prepare for recovery post-COVID19. This came on the back of the downgrade in 2020 full year GDP growth to between -7 and -4%, from between -4 and -1% projected in March 2020.
Altogether, the government is committing to close to SGD 100 billion over four packages, or close to 20% of GDP, to combat the fallout from COVID19 and to prepare the nation for the re-opening of the economy.
Together with the property tax rebates announced in the earlier budgets, the new cash grants to offset rental costs will mean that qualifying SME tenants of qualifying private commercial properties will receive two months of rental support while those of private non-residential properties (e.g. industrial and office properties) will receive one month of rental support.
When the new bill mandating landlords to grant rental waivers to qualifying SME tenants is passed by Parliament, SME tenants of qualifying commercial properties who have suffered a significant revenue drop will benefit from a total of four months of rental relief shared equally between the Government and landlords. SME tenants of industrial and office properties will also be given some relief.