HOUSING AND DEVELOPMENT (AMENDMENT) BILL

HOUSING AND DEVELOPMENT (AMENDMENT) BILL: Debate resumed.

6.11 pm

Mr Mah Bow Tan: Mr Deputy Speaker, Sir, first allow me to thank Members who have spoken in support of this Bill. I think there is one major component of this Bill

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and there are two minor components. Most Members have spoken in support of the first major component, ie, the provision to prevent moneylenders from lodging caveats on the proceeds. However some Members have reservations about the other aspects of the Bill which I will address later.

Let me first address Mdm Ho Geok Choo and Mdm Halimah's points. Specifically, their requests for details about existing caveats such as reasons why HDB owners borrow from moneylenders, the time-frame to honour such contracts and how my Ministry will be helping these flat owners with repayment of their debts such as mediating with moneylenders to reduce interest rates, and so on.

The first point I would like to make in respect to these comments is that the legislative changes that I am making today will not affect existing contracts with valid caveats lodged. This is an important point because I want to make sure that the sanctity of contracts that are already entered into legally is preserved. We cannot unilaterally change existing contractual rights for the parties involved. The Government cannot exempt borrowers from their legal obligations to repay their debts.

I also ought to clarify in case there is a misunderstanding – maybe Er Lee Bee Wah may have a wrong impression. This pertains to caveats lodged by licensed moneylenders. It does not deal with illegal moneylenders or loansharks. That is a totally different category altogether. In the first place, they do not enter into legally binding contracts. In the second place, they enforce their contracts in other ways, not in the ways that we normally think about.

The other thing is that the caveats that are lodged on the flats give moneylenders a right over the sales

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proceeds, only if the owner sells the flat. The moneylender cannot force the owner to sell his flat if he does not wish to do so. Of course, we all know that the flat sellers may then come under a lot of pressure to sell the flat to repay the loan if they have no other means to repay the loan and this is where the problem starts. So, that is the reason that the legislative amendments today are to prevent the use of HDB flats and its sales proceeds to be used as collaterals for the loans.

The question then is, what about the existing caveats? This is the question that Mdm Halimah asked. Mdm Ho Geok Choo also asked who are these flat owners who borrow from moneylenders?

Why do they borrow? What do they borrow for? I do not have data on why they borrow and what they are borrowing for. I think there are a variety of reasons why they do so but based on the cases that we meet at our meet-the-people sessions, the reasons vary. It could be to finance a business, it could be to pay for emergency expenses or it could be to pay for a lifestyle that they cannot afford or, worse still, to settle their gambling debts. Whatever the reason, I think it is important for flat owners to realise that they need to exercise financial responsibility and to live within their means. The HDB is not in the position to help them to settle their debts. What I am trying to do is to prevent more people from falling into debt and to lose their flats as a result.

Of course, having said that, we have to sympathise with those who do fall into such difficulties for whatever reason. We do have a responsibility to guide them and point them in the right direction. We can offer or give them guidance and suggest to them, for example, to go for credit and financial counselling. We have various VWOs like the Credit Council of Singapore who do good work. They sit down with these people, advise them on how they can reschedule their debts and in some cases, I am told that the Credit Council of

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Singapore would also talk to the lenders to ask them to reschedule some of their debts or look for other ways of repayment.

This is provided the borrowers are willing to go through this route and to subject themselves to some credit or financial counselling. Of course, those with financial difficulties have other avenues – we could refer them to CDCs. Perhaps they may be eligible for ComCare assistance or they may need a job if they are jobless. So there are other avenues that we can point them to for help but we are not in the position to help them to repay their debts.

The other major point that was raised by Mdm Halimah and Mdm Ho Geok Choo is the role of real estate agents in this whole process. And I do agree that real estate agents play a very important role. They do facilitate it and they are, in some cases, the culprits in this whole process. It is important that we now urgently raised the professional standards and ethics of housing agents.

Mdm Halimah specifically asked what measures my Ministry will be taking to prevent moneylenders from seeking out estate agents to secure borrowers, or vice versa , for real estate agents to recommend borrowers to moneylenders. I like to inform her that my Ministry will be introducing a Bill in Parliament soon to set up a new statutory board and this new statutory board will be called the Council for Estate Agents (CEA). I expect the CEA to be operational by the end of this year. With the setting up of CEA, we will be better able to protect public interests and raise the professional standards of the industry. We will do this by enhancing the licensing framework for the real estate agencies and we are also going to, for the first time, register estate agents. By tightening up the regulatory framework

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for the industry, we will be able to raise the standards of the industry and at the same time have a greater hold on both the agencies as well as the agents because we all know that estate agents play a very critical role in facilitating the whole property transaction process between buyers and sellers.

Estate agents have, in fact, a very critical role to play because many of the buyers and sellers are not sophisticated buyers and sellers. They need the estate agents to protect and promote their interests and to service them professionally and ethically. So clearly, there is a conflict of interests if we allow estate agents to be involved in moneylending because they will, then, not be able to fulfil their obligations to their clients when they also profit from moneylending activities. Under the new regime, we are going to prohibit estate agencies and agents from becoming licensed moneylenders or becoming their employees. Currently, they are allowed to. This is one of the steps that we are going to take under the proposed CEA regime. Mr Ang Mong Seng also supported the Bill but he suggested putting in place a cooling off period to give flat owners more time to mull over their transactions. I will ask HDB to look into his suggestion.

Now, I come to the other aspects of the Bill on which Members have raised queries. First of all, let me address Mdm Ho Geok Choo's point about illegal subletting of HDB flats. Mdm Ho asked about HDB's enforcement of cases of illegal subletting and how HDB will help those who are evicted, who are about to be evicted or who are not able to find affordable lodgings. She also asked about the number of illegal subletting cases.

The first point I want to make is that the tenants who sublet their rental flats – do not forget that they are given the opportunity to rent a HDB flat at highly-subsidised rentals, ie, $30 or $60 at

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most. Yet at the same time, they sublet this rental flat. What does that mean? It means that they are depriving other people in the queue, who are in greater need of a flat, from getting this flat and therefore, they are abusing these generous subsidies. Similarly, if they are able to sublet their flats, it means they have alternative accommodation. Why do they need a flat in the first place?

In 2008, HDB terminated the tenancies of 221 tenants. There were 221 cases of tenants who sublet their flats illegally. In 2009, there were 170 cases. In the first six months of this year, the cases have come down to 63 cases. I think this is the result of more publicity on illegal subletting. As I have said, the vast majority of those who sublet their flats actually have alternative accommodation. It is not as if they have no place to stay but there are a few who are in need of accommodation because they have no other housing options and HDB is prepared to help or has helped them on a case-to-case basis.

In fact, that illustrates the point that Mdm Ho made. I thank her for her kind words about HDB's compassion. She recognises that HDB, in its own quiet way and without publicity, does help a lot of people who fall between the cracks. They help them, hold their hands, look at their cases compassionately but not all cases deserve this compassion. There are cases that we have seen who have been helped on many occasions and still come back looking for more help. I think in those cases, we have to be very careful that we are not creating a mentality of coming to HDB for help every time they run into trouble and not exercising personal responsibility. HDB has to be very careful when it exercises this compassion that Mdm Ho talked about, so as not to generate or create a mentality of being over-dependant on the HDB and the Government. So families who are in need and who are deserving will be helped but

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they also need to exercise personal responsibility for their actions. Members may know that there is a whole array of counsellors in place at HDB branch offices that will help lessees look for alternative options, whether it is subletting, right-sizing, seeking advice on credit assessment, interim rental housing or in extreme cases, HDB rental housing. In other cases, counsellors will refer them to or link them up with CDCs for job matching, employment assistance and so on. So, there is a whole array of assistance measures that are being undertaken by a large group of what we call, housing counsellers, at the various HDB branch offices. If Members come across cases which require special help, they can either refer them to me or to my Ministry, either my Senior Minister of State or my Parliamentary Secretary, and we will see what can be done. That does not mean that every case that Members refer to us will be helped, but it does mean that we will look at the cases with closer scrutiny.

There is a bit of disquiet or reservation about one aspect of the Bill, which is the proposal to allow HDB to share its expertise outside Singapore. Er Lee Bee Wah and Mdm Cynthia Phua had some grave reservations about this, about allowing HDB to provide consultancy services outside Singapore and indeed, within Singapore. Their fear is that this will be at the expense of HDB's work locally. Let me assure both Members that this will not be at the expense of the work that HDB is doing. In fact, I am very clear that our primary responsibility, the main responsibility of HDB must be to its work here in Singapore and to the people here. I have absolutely no doubt about that and I have told HDB so. That is the reason why we have hived off Surbana to let Surbana do its work outside of Singapore.

The reason for this provision is, from time to time, we do get requests from governments on a government-to-

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government basis, for HDB to do some consultancy work overseas. A good case-in-point is the Tianjin EcoCity project. Tianjin EcoCity project is a government-to-government project, a collaboration between the governments of Singapore and the PRC, to develop a township. Within this township, one of the aspects is the provision of a good public housing system. This is where HDB's expertise and consultancy are required. It is not so much in the planning of the town but the policies of HDB, ie, home ownership policies, rental policies, financing policies, what are the policies that have worked for Singapore and what are the policies that have not worked so well. This is the kind of expertise that we are trying to share with overseas governments.

As for the local industry, yes, definitely, HDB plans to work with local companies, especially SMEs, on specific technical and consultancy services. It could be in environmental services, it could be in green buildings, it could be in solar panels, it could be in lifts, and so on. There are still specific areas that HDB may be required, from time to time, to share its expertise with others. This provision is to enable HDB to do so. Just to reiterate that it is not going to be a big money-spinner to make money for HDB. It is rather to generate a reservoir of goodwill on behalf of the Government with other governments or other institutions and, of course, also to keep our HDB officers involved with such efforts.

I thought I should reiterate that point.

I heard what the Members have said, there are still a lot of things that HDB needs to do and, indeed, is doing. The role and functions of HDB continue to evolve over time and the nature of its work is going to change. It will move more and more away from hardware provisions, ie, the infrastructure provisions, into the softer social aspects. I must add

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that HDB will need to work with the Town Councils and the Advisors to make sure that all aspects of high-rise living continues to improve in Singapore and to make sure that our residents continue to, not just learn how to live in high-rise environment but how to live graciously.

I think I have addressed most of the clarifications except for one where Ms Sylvia Lim asked a specific question. She asked why there is a need for an additional clause in section 51, clause 4 which reads, "any person or persons belonging to a class of persons prescribed by the Minister as a person to whom, or a class of persons to which, subsection (1) will not apply". I believe this is a general catch-all clause which we insert into the Bill that, from time to time, we may need. I am not able to tell you at this point in time who these people are but it does give us the flexibility, sometime in the future, to make these exemptions. So it is a catch-all clause to give the Minister flexibility.

I just want to conclude by saying that the main purpose of this Bill is to emphasise that an HDB flat is a long-term asset, as well as a shelter. Flat owners should not willingly or too freely use it to cash out, to take loans to finance other things, even for very deserving uses. The HDB flat is not the cash cow that allows you to cash out and spend the money. The legislative changes that I have introduced today serve to emphasise this point.

Mdm Cynthia Phua: Sir, the Minister has not responded to my request to implement the policy allowing the use of 50% of cash proceeds from the sale of a flat to after March 2010, rather than going backwards.

Mr Mah Bow Tan: Sir, that has nothing to do with this Bill. But since the Member has asked, I will explain what I said in March this year when I introduced the

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new policy. At that time, if the Member recalls, the second concessionary loan was only automatically applied to those who upgrade to bigger flats. It did not apply to those who downgraded or those who moved laterally. At the time, I emphasised that the purpose of this change was to reinforce the principle of financial prudence. What we saw was that people were upgrading to get a loan even though they could not afford a bigger flat. So you had people moving from a four-room to a five-room flat and when you ask them why, they would say, "Because the housing agent told me that this is the only way to get another loan from HDB." That was obviously a perverse incentive but what was the underlying premise behind it? The underlying premise was to be able to get a second concessionary loan from HDB.

I have asked HDB, through this policy, to make sure that the next loan, ie, the second loan, is granted for a genuine purpose. That genuine purpose could be upgrading as your family grows larger and you can afford to do so, or it could be downgrading because you do not need a big flat. So a downgrader will also get the second concessionary loan. But the size of the second loan cannot be independent of the proceeds that he has got from selling the existing flat. It cannot be so because otherwise, this will become another perverse incentive where people will be upgrading and downgrading in order to automatically get another HDB loan. That is the reason why we have instituted this 50% rule. The 50% rule says that you must make use of the proceeds from the sale of your current flat, your CPF as well as your cash. And if you have enough CPF and enough cash to buy your next flat, strictly speaking, HDB should not grant you a loan. We have decided that we are not going to be so unreasonable but to be slightly more generous. We will allow you to keep 50% and use the other 50% of your proceeds plus your CPF towards the purchase of

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your next flat. When we compute the loan, we will take that into account. That is the rationale for that 50% withdrawal.

Mdm Cynthia Phua: Sir, I understand the policy. In fact, during the Budget debate, I supported the policy and the amendment. But my point is: should it apply retrospectively? It should apply after the policy is implemented.

Mr Mah Bow Tan: It is not a matter of applying it retrospectively. We are simply saying that the 50% limit applies to all the proceeds of the sale that you have made prior to this. We have not applied the 50% rule retrospectively as such. But the definition of proceeds includes all the sales that you have made prior to this. This, again, is a way for us to enforce this concept of financial prudence. Do not forget that the grant of the second loan is to enable you to purchase something which you really need. If you have already made a lot of money from the sale of the current flat, then I think it is only fair that the HDB takes that into account irrespective of when you have sold the flat.

Er Lee Bee Wah: I would like to thank the Minister for clarifying our concerns. But according to the amendment, it is to enable HDB to provide technical and consultancy services both locally as well as internationally. If it is, as per what he mentioned just now, services or advice on policy matters, on how to lend money and so on, I wonder who will be our local clients. The next question is, what is there to stop HDB management from providing consultancy services beyond policies? I mean, we are very clear of the role of HDB but what is there to stop the management team from deviating from the original role of HDB.

Mr Mah Bow Tan: In fact, there is a lot of value in HDB which I believe can be adopted by our local industries. Some SMEs may see HDB as a threat. What

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HDB is seeking to do is to work with the SMEs to try to develop new processes or systems. I did not want to go into the details but here is one example. HDB is working with some local partners, SMEs in fact, to transfer and share technical knowledge with them, in the hope that they will then pass this experience to the other SMEs. The SMEs can then use this for their overseas projects, ie, gain track record in Singapore for their overseas projects.

Specifically, there is a project called a pre-fabricated extensive green roof tray system (PEG). I do not know whether Members have seen it. These are the trays which we use for green roofs. It is a process that has been developed by HDB and NParks. They partnered a private company to jointly develop a modular tray that can be used to spread the green roof. So this is an example of the things that can be done. There are many other examples. The PEG system was awarded the silver award in the Enterprise Challenge. And now, having created a solution with HDB and NParks, this SME is going to export the PEG technology to other urban environments facing similar problems as Singapore. This is just one specific example of how we are trying to use HDB as a test-bed to help small companies and do more with them, create value for them and to export the value overseas.

I wish to assure Members that HDB's mandate is not to go out there and to become a company or to compete with local companies. The idea is to allow the management to do these things. There is really no reason for HDB officers to go into this. Their KPIs do not include how much money they make for these SMEs. Their KPIs are dependent on many of the things Members are talking about, ie how they can build a more vibrant community, how they can continue to provide more

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affordable housing and how they can continue to facilitate gracious living in HDB estates. Those are their KPIs, not this. But this is just an aside to allow them to do other things as well. Another assurance – if Members feel that HDB is over-stepping its boundaries in any area, they can let me know.

Er Lee Bee Wah: Is there a need to amend the Bill to use HDB as a test-bed?

Mr Mah Bow Tan: Yes, there is. That is the reason I am doing it.

Mr Deputy Speaker: Mdm Cynthia Phua, last question, please.

Mdm Cynthia Phua: Sir, I just want to say that if we apply the proceeds for the flat that had been sold many years ago, say, in 2006, there may be very little proceeds left – maybe 10% only. Flat sellers really cannot afford for us to ask them to pay 50% of the proceeds that were realised four years ago. Can the Minister take into account sales proceeds after March 2010 when we implemented the policy, instead of considering sales proceeds before the policy was implemented?

Mr Mah Bow Tan: Most people buy their flat soon after they sold their previous ones. So those cases that the Member mentioned are actually very rare but they do happen. Perhaps, what I can offer the Member is to look at those cases specifically.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mr Mah Bow Tan].

Bill considered in Committee; reported without amendment; read a Third time and passed.