Shophouses Zoning: Commercial vs. Commercial & Residential which is a better investment?
- Vincent Ow
- Jun 27
- 4 min read
Singapore’s iconic shophouses are not just architectural gems — they’re prized investment assets. But before diving into a purchase, understanding the zoning of a shophouse is crucial.
In this guide, we explore the difference between Commercial and Commercial & Residential (C&R) zonings — and why that matters in terms of usage, taxes, financing, and price.
What Is Zoning?
Zoning in Singapore is regulated by the Urban Redevelopment Authority (URA). It determines the permissible uses for each land parcel or building — influencing factors such as rental potential, buyer eligibility, and renovation approvals.
Historically, the upper floors of many shophouses were used for residential purposes, as housing was limited and these spaces accommodated a large influx of immigrants. However, as immigration slowed and more public housing developments were built outside the city centre, URA gradually revised its zoning plans to reflect evolving urban needs and population distribution.
Commercial Zoning
These shophouses are zoned fully for commercial use, from ground to top floor.
Key Features:
Both floors must be used for commercial activities (e.g., office, clinic, F&B, showroom)
No residential use is allowed — not even for staff accommodation
Common in the CBD, Chinatown, Boat Quay, and conservation areas
💰 Financial Implications:
ABSD (Additional Buyer’s Stamp Duty): ❌ Not applicable, even to foreigners or companies
Financing: Higher LTV allowed (up to 80%, subject to profile). The commercials units buying under personal name will not affect by the total debt service ratio ( TDSR )
GST: May apply if owned by a GST-registered entity
Price Positioning:
Generally priced higher than Commercial & Residential shophouses due to:
Full commercial usage potential higher demand rental yield
ABSD-exempt status (attracts more buyers)
Greater flexibility for corporate or foreign investors
Typically located in high-demand city areas
Commercial & Residential (C&R) Zoning
These shophouses allow dual-use: commercial on the ground floor and residential on the upper floors.
Key Features:
Ground floor must remain commercial (e.g., retail, office)
Upper floors can be used for residential living or rental
Found in fringe areas like Joo Chiat, Geylang, Balestier, and Little India
💰 Financial Implications:
ABSD: Applicable for the residential component. 2023 Guideline
20% for Singaporeans (2nd property)
60% for foreigners
65% for Entities
Financing: For properties with residential use on the upper floors, financing is assessed under residential guidelines — including stricter loan-to-value (LTV) limits. If purchased under a personal name, the Total Debt Servicing Ratio (TDSR) will also apply.
Property Tax: Mixed-use rate applies (higher than residential but lower than full commercial)
Price Positioning:
Typically priced lower than full commercial units due to:
ABSD liability
Stricter use restrictions
Smaller buyer pool (e.g., foreigners may avoid)
Often in less central areas
Summary Table
Criteria | Commercial | Commercial & Residential |
Area type | CBD, city centre, commercial hubs | City fringe, heritage districts |
Intended use | Business only | Shop below, home above |
Buyer profile | Investors, corporates, foreigners | Owner-occupiers, dual-use buyers |
ABSD | ❌ Not applicable | ✅ Residential |
Rental use | Office, retail, F&B | Dual income (retail + residential) |
Which is a better investment?
In recent years, many investors have shown growing interest in commercial & residential shophouses due to their lower entry prices and the strong rental demand for upper-floor residential units. Some buyers also choose this type for own stay, living on the upper floors while leasing out the ground floor for commercial use, creating a practical mix of personal and rental utility.
Shophouses are not just real estate — they’re legacy assets. Choosing the right zoning profile ensures your investment aligns with your financial and lifestyle goals.
Case study
Commercial vs Commercial & Residential
Case study 2024 transacted : East Coast Road shophouse
Buyer Profile Assumed: Singaporean personal 2nd Property
LTV (Loan-to-Value): 75% for both cases (typical upper limit for individuals)
Criteria | Commercial | Commercial & Residential |
Zoning | Full Commercial | Mixed (Ground: Commercial / Upper: Residential) |
Average PSF | ~$6,000 | ~$3,000 |
Land Size | 1,500 sqft | 1,500 sqft |
Purchase Price | $9,000,000 | $4,500,000 |
ABSD (20% for 2nd property) | ❌ Not Applicable | ✅ $450,000 (cash only) estimated |
Loan (75% LTV) | $6,750,000 | $3,375,000 |
Down Payment (25%) | $2,250,000 | $1,125,000 |
Total Cash Required (incl. ABSD) | $2,250,000 | $1,575,000 (Down: $1.125M + ABSD: $450K) |
TDSR Applies? | ❌ No | ✅ Yes (due to residential component) |
Calculation is only for reference, the buying is base on case by case basic.
Summary
Commercial & residential units clearly offer a lower entry price compared to full commercial shophouses. However, they come with more restrictions and require a higher upfront cash outlay.
Category | Commercial & Residential (C&R) | Commercial |
💰 Entry Price | Lower, more affordable | Higher upfront price |
💵 ABSD | Applicable (must be paid in cash) | Not applicable |
📉 TDSR (55% cap) | Applies (personal name loans) | Not applicable |
💳 Cash Outlay | Higher — ABSD + down payment | Lower (no ABSD, higher LTV) |
🔄 Resale Liquidity | Harder resale due to buyer restrictions | Easier resale (wider buyer pool) |
📈 Rental Yield | Dual-income, but lower yield | Typically higher commercial yield |
Final Thoughts - Whether a commercial or commercial & residential shophouse makes a better investment depends on your objectives, financing capacity, and buyer profile.
Commercial & Residential (C&R)- Individual buyers intending to stay on the premises, as this can significantly ease the cash outlay and make better use of the space.
Commercial - On the other hand, if you’re purchasing through a corporate entity or are a foreigner, opting for a full commercial shophouse is generally more advantageous — as it helps you avoid ABSD and enjoy greater ownership flexibility.
Ready to Explore Conservation Shophouse Investment?
Unlike any other property investment, navigating the shophouse market takes expertise — from understanding zoning laws to how the performance of which district and selecting high-growth districts
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