Ravi Chandran
Additional Loan and Cashflow Support for Landlords and Businesses Affected by COVID-19
The Ministry of Finance (MOF), the Inland Revenue Authority of Singapore (IRAS), Enterprise Singapore (ESG), and the Monetary Authority of Singapore (MAS) announced on June 3 a package of measures to support businesses affected by Covid-19 and landlords that may face cash flow constraints as a result of providing relief to tenants as proposed under the COVID-19 (Temporary Measures) (Amendment) Bill (“COVID-19 Amendment Bill”).
This package of measures will help landlords and businesses affected by Covid-19 with their existing loan commitments, and ease their cashflow needs. The new measures complement relief measures announced by MOF, MAS and the financial industry earlier. The infographic in the Annex provides an overview of the suite of relief measures that are available to landlords.
Enhanced Credit Reliefs for Landlords and Businesses Affected by COVID-19
MAS has worked with the banks and finance companies to enhance the current relief measures for landlords affected by the Covid Amendment Bill. This follows the announcement by the Ministry of Law on rental relief measures that will be tabled in Parliament under the COVID-19 Amendment Bill.
Landlords who are individuals (“individual landlords”) and are current in their loan repayments as at 1 February 2020 can defer both principal and interest repayment up to 31 December 2020 if they are required under the COVID-19 Amendment Bill to provide their tenants rental waivers or payment rescheduling. Individual landlords who successfully apply for a reduction in rental waivers on the grounds of financial hardship are also eligible for this relief measure. Interest will accrue only on the principal amount deferred and no interest will be charged on the deferred interest payments.
Individual landlords can also opt to extend the loan tenure by up to the corresponding deferment period to ease monthly instalments when they resume regular repayments. Their credit scores will not be affected when they take up payment deferments.
As with the previous industry support packages, the enhanced relief measure for individual landlords will be provided on an opt-in basis. As payment deferments and loan tenure extensions will result in higher overall interest costs, borrowers should carefully consider the additional interest costs they will eventually have to bear, and balance this against their need for cashflow relief.
When applying for the relief, individual landlords should submit to their bank and finance company: i) a copy of IRAS’ notice of cash grant; ii) the relevant tenancy/lease agreements; and iii) a declaration of the relief to be provided to their tenants. These documents can be submitted via email or other digital channels. Individual landlords may apply for the new relief measure once IRAS begins issuing the notice of cash grant in July 2020. Banks and finance companies will aim to process all applications promptly.
Businesses affected by Covid-19 crisis can already apply to defer principal payments on their commercial and industrial property loans
Landlords who are small and medium enterprises (“SME landlords”) can already apply to defer principal payments on their commercial and industrial property loans. Most of the applications received so far have been approved. Landlords who need additional credit to meet their immediate cashflow needs can apply for loans under ESG’s Temporary Bridging Loan Programme or Working Capital Loan Scheme through their banks and finance companies.
The larger corporate landlords, including real estate investment trusts listed on the Singapore Exchange (S-REITs), are encouraged to approach their banks or finance companies to explore funding solutions to meet their cashflow needs. Some have already requested for payment deferrals or temporary loan covenant waivers, which banks have acceded to.
Banks provided assurance to businesses affected by Covid-19
Banks have provided assurance that there will be no automatic enforcement of loan covenant breaches with landlords as a result of the constraints and requirements imposed on the landlords by the COVID-19 Amendment Bill. Banks will work closely with landlords to address any such loan covenant breaches (e.g. debt service covenant and interest service covenant), such as by granting a waiver of the breach and/or revising the loan covenants to take account of the current circumstances.
Further Extension of Time for Distribution of Taxable Income for S-REITs
MOF and IRAS had announced on 16 April 2020 that S-REITs would have an extended period of up to 12 months from the end of their financial year (FY) 2020 to distribute their taxable income derived in FY2020, to qualify for tax transparency treatment.
In view of the new rental reliefs under the COVID-19 Amendment Bill, MOF and IRAS will further extend the timelines for S-REITs to distribute their taxable income derived in FY2020 and FY2021. For taxable income derived in the FY ending in 2020, S-REITs will have until 31 December 2021 to distribute them; and for taxable income derived in the FY ending in 2021, they will have until 31 December 2021 or 3 months after the end of FY2021, whichever is later, to distribute them.
“Those that want to talk about SME loans, can also talk to loan consultants. Having long term and strategic relationship with various banks, loan consultants would be best placed to help SME owners the best.”
