IMPACT AND IMPLICATION OF THE REVISED DEVELOPMENT CHARGE SYSTEM

Abstract

Development Charge (DC) is a levy imposed by the government on any development which involves either a change of use and/or more intensive use over and above that which is stipulated in the Master Plan(MP). First introduced in 1965, it has evolved from a levy based on a pre-determined fixed schedule of rates to one based on valuation. Recently, the move towards, or rather the reversion to a system based on fixed schedule of rates, has elicited diverse views from the real estate practitioners and academicians alike. The system of DC based on valuation has been in vogue for almost a decade. Inspite of the initial outcry against the mechanism for dealing with appeals and the DC rate, the real estate profession has got accustomed to it after several modifications. The DC rate has been reduced from 70% to 50% and appeals on DC exceeding $250,000 are now heard by a panel of 3 inspectors, instead of one. The revised system, which uses rates stipulated in the DC Table, is introduced with the objective of instilling a greater degree of certainty in the development market. That is, developers will be able to compute the amount of DC payable before submitting their plans and will therefore have more certainty on the feasibility of their projects. It is believed that the system will be simpler to use and easier to administer. As with all changes, dissatisfactions are bound to arise. The initial proposal of a fixed rate system on the 4th of May 1989, to replace the DC system based on valuation has been set aside to a later date. (It was originally planned to take effect on the 1st of July 1989). After much deliberation, the authority has announced the implementation of the revised system, i.e. whereby the proposed fixed rate system is to run parallel with the system based on valuation with effect from the 1st of September 1989, for a trial period of one year. In view of these changes to the DC system, it leads us to ponder at the resulting implications and consequences. Is the change for better or worse?