High profit margins for DBSS developers

Developers can earn gross profit margins of up to 76 percent from the public housing projects they develop under the Design, Build and Sell Scheme (DBSS), according to a Business Times report.

In the report, five out of the seven DBSS projects launched since 2008 have achieved gross profit margins of at least 28 percent.

This is similar to the 30 to 40 percent gross profit margins that real estate groups earn when developing private mass-market projects.

In some cases, however, DBSS margins were even higher.

Sim Lian Group, for example, can make a gross profit margin of approximately 76 percent from its recently launched Centrale 8 in Tampines — even after revealing that prices are now lower than previously announced.

Hoi Hup Sunway generated the highest gross profit for its 1,203-unit The Peak @ Toa Payoh, generating some S$257 million in total.

Using a generous construction cost estimate of S$200 psf ppr, the report included the land and building costs in computing the total development cost of each project, to determine the breakeven price. Industry watchers noted that construction costs could be as low as S$160 psf ppr, in some cases.

“I am surprised that the margins are so high,” said Ku Swee Yong, Chief Executive at International Property Advisor.

“All the more reason for us to re-examine the raison d’etre for DBSS in view of the need for a massive supply of affordable flats to satisfy the past five years of pent-up demand.”

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