MAS, along with the Ministry of Finance (MOF), the Inland Revenue Authority of Singapore (IRAS), and the Enterprise Singapore (ESG), announced a package of measures to support those that may face cash-flow constraints as a result of providing relief to tenants as proposed under the COVID-19 (Temporary Measures) (Amendment) Bill (also known as the COVID-19 Amendment Bill). MAS has worked with banks and finance companies to enhance the current relief measures for landlords affected by the COVID Amendment Bill. This follows an announcement by the Ministry of Law on rental relief measures that will be tabled in Parliament under the COVID-19 Amendment Bill.
This package of measures will help landlords with their existing loan commitments and ease their cash-flow needs. The new measures complement relief measures announced by the Ministry of Finance, MAS, and the financial industry earlier. 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 (for example, 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. The credit relief for landlords includes the following:
- Landlords who are individuals and are current in their loan repayments as at February 01, 2020 can defer both principal and interest repayment up to December 31, 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 installments when they resume regular repayments. Their credit scores will not be affected when they take up payment deferments.
- Landlords who are small and medium enterprises 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 cash-flow needs can apply for loans under ESG’s Temporary Bridging Loan Program 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 cash-flow needs. Some have already requested for payment deferrals or temporary loan covenant waivers, which banks have acceded to.
In view of the new rental relief 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 December 31, 2021 to distribute them; and for taxable income derived in the FY ending in 2021, they will have until December 31, 2021 or 3 months after the end of FY2021, whichever is later, to distribute them. The extension will give S-REITs more flexibility to manage their cash flows amid a challenging operating environment due to COVID-19. IRAS will provide further details of the change by the end of June 2020. 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 cash-flow relief. Banks and finance companies will aim to process all applications promptly.
Keywords: Asia Pacific, Singapore, Banking, Credit Risk, COVID-19, REIT, Payment Deferrals, Loan Moratorium, COVID-19 Amendment Bill, MAS
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