BUILDING OF NEW HDB FLATS

BUILDING OF NEW HDB FLATS:

(Build according to demand): 3.

Mdm Ho Geok Choo asked the Minister for National Development whether there are plans to return to the Build-to-Sell mode for building new HDB flats as waiting three to four years for Build-to-Order flats affects many new applicants' resources and plans to start a family.

The Minister for National Development (Mr Mah Bow Tan): Mr Speaker, Sir, the current Build-To-Order (BTO) system was introduced in 2001. Prior to this, HDB adopted the Registration for Flats System (RFS), which is what the Member refers to as Build-to-Sell. Under the RFS, HDB built flats based on the number of applications in the queue. At the height of the property boom in the mid-90s, there were 150,000 applicants in the queue, and the waiting time for flats was between six and seven years. When the Asian Financial Crisis struck in 1997, the 150,000 applications in the queue dissipated and HDB was left with 31,000 unsold flats.

Column: 2182

HDB took five years to clear its stock of unsold flats. Having such a large stock of unsold flats is a waste of public money, as many Members in this House pointed out at that time. That is why HDB has decided to build only upon confirmation of demand. Under the BTO system, construction will commence once the majority of the flats in a project are booked and downpayments are made. The time required to construct a typical HDB block takes about three years. This is no different from buying private properties. This certainty of being able to collect the keys to a new flat in three years in fact helps the flat buyers in their planning, and gives them time to save up for their renovation and purchase.

To facilitate couples in planning ahead, HDB has introduced the Fiancé/Fiancée Scheme to allow courting couples to apply and book a flat ahead of their marriage. Hence, the couples will have a new home when they are ready to get married. About 30% of first-time flat buyers make use of this scheme currently. For those who prefer to have a flat immediately, the resale market offers a wide range of flats in different locations, but at market prices.

My advice to young flat buyers is to plan ahead and to buy a flat within their means. For those who apply for BTO flats in non-mature estates, the vast majority will be invited to select a flat within two tries.

Mdm Cynthia Phua (Aljunied): Mr Speaker, Sir, I would like to ask Minister to clarify. There is a time lapse between the applicants applying for the flat and meeting the HDB's requirement before the flats are built. Minister promised a three-year construction period. But what is the time period between the point when the first applicant applies and the time HDB decides, or for the requirement to be met, for that precinct to be built? So, three years refer to only the construction

Column: 2183

period. There is also another time period before the go-ahead for construction. So, what is the average time in total, for the precinct to be built for the past BTO projects?

Mr Mah Bow Tan: I think the Member has a point in that there is a certain time period from booking a flat and before construction starts. The amount of time needed is really for HDB to process the applications and also to press the button in order to start the construction. That time lapse is not very long because usually, after the bookings are made, the contract would be let out. It is not a very significant amount of time. What may lengthen the process is really the number of tries that the person or the couple may be putting in to get that first booking. I mentioned in my reply that under the current rate of rolling out BTO projects – which is once a month – the chances of the person being successful in getting to book a flat is actually very high. In other words, the time taken to book a flat is now considerably shortened. So, if you add that time, in total, you would probably add a couple of months to six months, to the whole process. That is the order of magnitude that we are talking about. Obviously, it varies from project to project and it varies from person to person but on average, that is the order of magnitude.

Mdm Ho Geok Choo: Mr Speaker, Sir, I would just like to seek a clarification with Minister. Will there be a return to the other mode of build-to-sell in the policy of HDB? Another question I would like to ask is whether the current 12,000 HDB flats to be launched under BTO this year will be sufficient to stave off pent-up demand.

Mr Mah Bow Tan: If I may explain again the BTO system, it gives certainty to both HDB as well as the buyer. In that way, there is much greater sense of what

Column: 2184

you are getting, when you are getting it, and at what price. In the old system, ie, the Registration for Flats system or the Build-to-Sell system, there was an element of uncertainty. For example, the queue could build up, for example, in the 1990s, to as much as 150,000. I do not know what that queue would be today if we were to implement that system, probably in the same order of magnitude. That creates a lot of uncertainty for both buyers as well as HDB. When HDB sees 150,000 people in the queue and it, at the maximum, builds 20,000 to 25,000 or even at a stretch 30,000 flats a year, you are talking about five years before you can even clear the queue. There is no assurance that by the time you build those flats, the buyers will still be in the queue. And that was, in fact, what happened then. In other words, you are anticipating demand based on the length of the queue and you would not know whether that is genuine demand or not, because there is no commitment to buy. Here, under the BTO system, you build when there is a commitment to buy and, then, there is certainty of time. Granted that three years for some couples may be long – and I think this is the thrust of the Member's question – here we have a way for couples to shortcut that process. A significant number of people are making use of that change in the booking system.

In short, I do not think we want to go back to the previous system. In fact, we have improved the system and the BTO system is superior to the other system. We can tweak the system, if need be, at the edges, but I do not think we should go back completely to the old system which has its major disadvantages.

As to whether the figure of 12,000 is enough, I think I have given assurance to the public many times that if 12,000 flats are not enough, we will continue to roll out BTO projects. That, again, is another advantage of the BTO because that gives us a chance to know whether the genuine

Column: 2185

demand is there or not. And if there is genuine demand and there is booking, and people are putting down the downpayment and saying, "Yes, I want this flat", then we will continue to roll it out. Unfortunately, the subscription rates that we are getting now – although it appears large – do not seem to indicate that there is such a large pent-up demand, contrary to what many of us think. So, we will have to wait and see. We will keep on rolling out 1,000 or more than 1,000 units a month over the next few months to see whether that demand is being met or not. If the answer is there are not enough flats, we just keep rolling it out. On the other hand, if there is enough demand or more than enough demand, we will be able to scale down the supply accordingly. It is very much responsive to actual demand, and I think that is the advantage of the BTO system. So I think we should keep the system.

Mr Speaker: Mr Yeo, last question.

Mr Yeo Guat Kwang (Aljunied): Sir, may I seek a clarification from the Minister? Is it true that for the BTO system, in addition to the construction time and the process that HDB needs to take, there is also a time factor, which is we have to wait until there is a total of 75% or more than 75% of the applicants for a certain block before HDB decides to build the block or the precinct? I think that actually poses quite a lot of uncertainty for the waiting times for the new applicants.

Mr Mah Bow Tan: I think this question is similar to Mdm Cynthia Phua's question just now which I have answered. Just to reiterate the answer, there is no additional time involved in meeting the 75% because once the bookings close – and there is between 70%-75% of bookings – then we will proceed to build. In fact, since we started the system, all, except for one that I remember, the BTO projects actually proceeded. So, this hurdle rate

Column: 2186

of 70% is not difficult to achieve. On the other hand, it does give us a fairly comfortable assurance that if we proceed to build, there will not be an oversupply.

So, the answer is no – there is no additional time and no additional delay involved in meeting the 70% or 75% hurdle rate.