Page 4 - Build Strong Resilience in the Real Estate and Construction Sector

PaRT I : challenges in the real estate

and construction sector

(A) MACrOeCONOMIC SeNTIMeNTS

the sharp fall in singapore's gross domestic Product (“gdP”) in Q1 of 2020 has
also triggered weaker business sentiments which affected all players in the real
estate ecosystem.

Property owners in the industrial and commercial sectors are facing pressure in
renewing leases, whilst tenants are worrying about fulfilling rental obligations.
Builders and contractors are experiencing project delays due to project
stoppages, causing uncertainties in project scheduling and collections.

slowing imports of building materials (e.g. steel, concrete, pre-cast units) are
resulting in project delays whilst limited supply is pushing up prices. Portfolio
investors are also not spared as viability of their investments and ability to
make timely payments on interest and principal are important considerations.

(b) SUppLy-AND-DeMAND ShOCk

We are facing an unprecedented supply-and-demand shock. this is impacting
commercial leasing, as tenants mull over options such as flexible work
arrangements and explore alternative telecommuting measures. this demand-
and-supply shock also extends to the buying sentiments of properties in the
corporate and residential spaces. increased social distancing measures have
also affected foot fall in retail malls. The impact on tourism and hospitality
sector is clearly felt.

(C) FINANCING AND DebT ServICING ChALLeNGeS

Financing and a company’s ability to take on responsible level of gearing is
an inherent part of a business. Financing terms, covenants and interest rates
costs are, therefore, key concerns when seeking funding for expansion or
simply to meet working capital demands. the coVid-19 pandemic has shaken
the confidence of the global stock markets and forced financial institutions to
cast a keener eye on non-performing loans. as such, real estate companies
have started to relook at their facilities and debt obligations. Whilst banks are
offering deferment of repayments and more attractive loan facilities, these
provide only temporary relief.

(D) The MANpOwer CONUNDrUM

the circuit Breaker measures have triggered a restriction of movement in
dormitories and stop-work order at project sites and places of business that
are not considered essential. the real estate sector is highly dependent on the
foreign workforce and these restrictions are now causing project delays and,
potentially, contract cancellations. Businesses faced with manpower challenges
are also being forced to take measures to save jobs and provide financial security
for employees. a post coVid-19 world does not promise immediate relief to
these issues as it is also widely expected that social distancing and workplace
health and safety measures will likely impact workforce productivity and cost.

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