COVID-19 Impact on Construction Costs and Estate Upgrading and Greening Plans

Ms Tin Pei Ling asked the Minister for National Development given the current high construction costs, how will this affect the demand for green building projects and Singapore's Green Plan.

Sir, construction costs in Singapore have increased due to the COVID-19 pandemic. The contributing factors include an increase in foreign manpower costs due to border measures that limit the inflow of our migrant workers, additional costs and reduced productivity due to the Safe Management Measures at the worksite to lower the risk of transmission in the sector, as well as increases in the cost of construction materials.

The Government has implemented a suite of support measures to help construction firms cope with the additional costs arising from COVID-19. For example, the $1.36 billion Construction Support Package helps share the costs that firms have incurred for implementing safe management measures, as well as non-manpower related prolongation costs for public sector construction projects. Firms have also received support for manpower costs through the Jobs Support Scheme and Foreign Worker Levy waivers and rebates. We also provided rental waivers for tenants and lessees of Government-owned properties for industrial, office and agricultural use and are sharing the risks for bridging loans to help qualifying Singapore-based companies ease their cashflow. In addition, we put in place unprecedented legislative mechanisms to provide reliefs to construction firms. For example, the COVID-19 (Temporary Measures) Act requires project parties to fairly share the increases in foreign manpower costs due to COVID-19.

These measures have mitigated some of the cost increases facing construction firms. That said, tender prices for public sector construction projects, including public housing and upgrading projects, have generally increased this year compared to pre-COVID-19 levels.

We recognise that public housing projects are necessary to serve the needs of Singaporeans. So, we will press on to deliver these projects and maintain a steady supply of public housing to meet demand. The increase in cost will not be passed down to flat buyers.

Since August last year, when Build-To-Order (BTO) construction work fully resumed, the Housing and Development Board (HDB) has been working with its contractors and consultants to keep construction progress on track and avoid further delays as much as possible, while ensuring that project quality and safety standards are not compromised. HDB is also supporting contractors to bring in more workers from various countries and working with other agencies to minimise cost increases and reduce construction delays. For upgrading projects, HDB resumed construction works progressively from August last year. HDB has also been similarly working with its contractors and consultants to minimise the delays to these projects, while ensuring that any upgrading works are carried out in adherence to prevailing Safe Management Measures.

The rise in construction costs has not adversely affected the demand for green buildings. The Gross Floor Area, or GFA for short, of developments applying for Green Mark certification has remained steady at around half of overall construction demand since 2018. One possible explanation is that the cost premium of fulfilling the Green Mark requirements is small in proportion to overall construction costs, at less than 5% for most projects.

Furthermore, the resultant energy savings during the life cycle of a building outweigh the upfront investment costs. For example, a large office building of 15 storeys which achieves the Green Mark Platinum standard can save around $300,000 in operating costs annually. The Government also provides funding support for the development and deployment of green technologies and works with financial institutions on the financing of energy efficiency retrofits.

The Government remains committed to pursue our sustainable development agenda under the Singapore Green Plan 2030. Some infrastructure projects may face construction delays in the immediate term, but we will press on with our plans and sustainability efforts. We will also continue to monitor the impact of the pandemic on the sector and work closely with trade associations and other partners to support the industry through this crisis.

I thank the Minister of State for the reply and assurance. I have two questions.

One is on the upgrading projects. There is a Neighbourhood Renewal Programme (NRP) that was slated for McPherson constituency, it was offered before the pandemic, but the tender was only called I think sometime earlier this year. As a result of the increasing construction cost, the scope of work that we can undertake within that budget has been drastically reduced. So, I would like to ask whether the budget could be reviewed or what other measures could we consider so as to avoid or minimise disappointment from the residents.

Secondly, can I ask whether we are still on track to meeting the green targets of having at least 80% Super Low Energy buildings from 2030, as well as achieving 80% energy efficiency improvement by 2030?

Sir, I thank the Member for her two supplementary questions.

On the first question on the various upgrading programmes, for example, the NRP which the Member has referenced, these tenders are usually scheduled to be called from the second half of 2021 onwards and work should commence in 2022. And for those which have already been called for and work has been scheduled, these are projects that we will be happy to work together with the Town Council on. For these selected NRP projects, the Town Councils have been advised to consider alternative modes to engage the residents for those which need to garner the necessary support for the projects, given that we are in a pandemic. And for those projects which are looking at scope increases and budget reviews, we will look at them on a case-by-case basis. But we encourage the Town Councils to work within their budgets and reduce upgrading items if necessary. And it is something that we will discuss with the Member if there are issues raised for that specific project.

On the second question around the 2030 targets, I thank the Member for her question. The Member referenced the targets that we announced at the Committee of Supply (COS) this year. Eighty percent of buildings to be green by 2030, 80% of new developments to be Super Low Energy buildings and achieving 80% improvement in energy efficiency for best-in-class buildings by 2030.

We have been in discussion with the various industry partners including construction firms and developers. We are committed to these targets. These are ambitious targets we set for ourselves, for Singapore, under the Singapore Green Plan 2030.

As I mentioned earlier, while some infrastructure projects may face construction delays in the immediate term and we may need to absorb higher cost to implement those projects in view of the current situation, many of the projects have not been impacted. The overall progress of the Singapore Green Plan is on track. We will press on with this effort and achieve the sustainability targets that we have committed to.

Most importantly, many firms and developers see these investments in green and sustainability projects as something that are commercially viable and something that benefit them. Overall, this is a small part of the construction cost and we are committed to achieving those targets by 2030.