COMPENSATION FOR FLATS UNDER COMPULSORY ACQUISITION SCHEME

COMPENSATION FOR FLATS UNDER COMPULSORY ACQUISITION SCHEME: 19.

Mr Lim Biow Chuan asked the Minister for National Development why HDB pays compensation of only 90% of the market value for a flat which is under compulsory acquisition.

The Senior Parliamentary Secretary to the Minister for National Development (Dr Mohamad Maliki Bin Osman) (for the Minister for National Development): Mr Speaker, Sir, HDB takes compulsory acquisition (CA) action against flat lessees who have committed major lease infringements such as the unauthorised subletting of flats. CA action is also taken, as a last resort, against mortgage arrears cases where lessees are unresponsive to HDB’s efforts to help them work towards a long-term solution.

HDB’s compensation policy under CA is designed such that lessees do not enjoy undue financial gains as a result of the CA action. The compensation quantum takes into consideration the financial penalty for the lease infringements as well as HDB’s holding cost and administrative costs. Hence, for flats that are eligible for resale in the open market, HDB compensates them at 90% of the market value of the flats at the point of CA.

Mr Lim Biow Chuan (Marine Parade): May I ask the Senior Parliamentary Secretary, if the cases involved are lessees who are unable to pay their

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mortgage instalments on time, would it be more fair to the lessees for them to be compensated based on 100% of the market value? After all, the Land Acquisition Act does provide for compensation to be paid at the full market value when the State acquires land. So, why should HDB be any different?

Dr Mohamad Maliki Bin Osman: Sir, I think Members of the House are well aware that when HDB decides to finally acquire the flat of owners who are in arrears, it really does this as a last resort, meaning that it has tried to work very, very hard with each and every case. In the first place, from the moment the lessees are in arrears, HDB tries to understand their circumstances and tries to help them. And at different points in time, there is no stopping a lessee from selling the flat in the open market and get market value, or even higher than market value. So, at any point in time, the lessee is allowed to do so. Even at the very last moment when HDB issues the note of intention of the acquisition of flat, the lessee is still eligible and can still sell the property in the open market. There is no reason for HDB to compensate the lessee for the value equivalent to the market value because the lessee has the option to do so, even before compulsory acquisition action takes place.

Mr Lim Biow Chuan: Mr Speaker, Sir, as a last resort or otherwise, if HDB allows the lessees to sell at market value before acquiring the flat, then why not just compensate them at market value? Why allow them to sell at market value and yet, when HDB does decide to acquire the flat, it chooses to pay them 90%. That 10% is lost by the lessee. We should be fairer to them.

Dr Mohamad Maliki Bin Osman: Sir, as mentioned earlier, we should not unduly incentivise or allow lessees to get financial gains from CA action. When HDB

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puts in the processes of trying to help these families, there is a lot of manpower as well as administrative costs that goes into it. And I think that it is not unreasonable for HDB to tell the lessees that if it compulsorily acquires the flat, it can compensate them for lesser than that, because it has always given them the opportunity to do so. If that is the case, the lessees will just wait out and do not want to pay for their flats and, at the end of the day, expect HDB to just give them compensation according to market value.