RENTALS AT JTC AND HDB PREMISES

RENTALS AT JTC AND HDB PREMISES: 3.

Er Lee Bee Wah asked the Minister for National Development in view of the current economic climate, whether his Ministry will put a freeze on all rentals for JTC and HDB premises.

The Senior Minister of State for National Development (Ms Grace Fu Hai Yien) (for the Minister for National Development): The commercial and industrial premises under HDB are generally let on three-year term tenancies during which the rents are fixed. During tenancy renewals, the rents are adjusted to the prevailing market rent. Tenants have the option of renewing their tenancies for only one or two years if they expect rents to fall over time.

A freeze on rent increases, as the Member suggested, is not equitable as it will result in different rental subsidies for different tenants who may have renewed their tenancies over different periods of time. It is also not advisable for HDB rents to be disconnected from market realities. A better approach to help businesses during the economic downturn is to provide rental rebates. Such rebates help to lower business costs while allowing for rent adjustments to market conditions.

Hence, as part of the Government's "Resilience Package" announced earlier this year, HDB will be granting a 15% rebate for all commercial and industrial

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tenants, as well as industrial-land lessees for a year, from January to December 2009. This 15% rebate includes the savings from property tax rebates which HDB will pass on to tenants.

HDB also conducts regular reviews of market rents. In recognition of the prevailing market conditions, HDB has reduced the market rents by 5% since January 2009. So, instead of freezing, HDB has actually reduced its rentals by 5% in January 2009. For the small number of tenants who face substantial rental increases in spite of these measures, HDB will stagger the rent increases over the tenancy term.

HDB will monitor the market situation closely to see if additional measures are necessary. I understand that JTC adopts a similar approach in providing assistance to its industrial tenants.

Er Lee Bee Wah: Sir, I would like to ask the Senior Minister of State, for those tenants who got their rentals adjusted upwards just before the Government announced the 15% rental rebate, would these tenants get their rentals adjusted back to the old rates?

Ms Grace Fu Hai Yien: Mr Speaker, as I have said earlier, the rentals are fixed at different times and they are renewed at different periods of time. So, in order to ensure equity between two tenants, we have to adjust their rental rates to a market rate, such that two tenants who are side by side and have their tenancies renewed at different points in time, will pay the same rent.

Take, for example, if one tenant has renewed his rental rate three years ago – 2007 – his rental may be 7% to 10% below his neighbour's, who had his rental rate renewed a year or two years later. If we do not review the rental rate to adjust it to market rate, there will be inequity between two tenants. So, it is only fair

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for HDB to review the tenants' market rentals and at the same time, provide an across-the-board 15% rebate. So tenants who may have renewed their leases at different points in time, will be charged the same rentals. That is a fairer system. To answer the Member's question, specifically, a tenant who is renewing his tenancy now, will probably mean his tenancy was fixed three years ago before the run-up in the property prices and rental rates. If we do not review his rental rate, he would be enjoying a significant cost advantage over his fellow tenants next to him.

Mr Speaker: Mdm Cynthia Phua, last question.

Mdm Cynthia Phua (Aljunied): Sir, I would like to declare my interest. I am working in a retail chain and I am actively negotiating rental as well. For HDB and other Government agencies, I understand they currently do take into account the rental rebate of 15%

but they do not adjust to match market rental, in view of the rebates. They say, "Because of the rental rebates; hence, I will keep the rental as it is." I think this is the practice. After listening to the Senior Minister of State, I would like to appeal to her to look into adjusting the rental in line with the current market condition, instead of just taking into account an across-the-board 15% rebate.

Mr Speaker: What is the question?

Mdm Cynthia Phua: This is the question. I ask the Senior Minister of State to consider adjusting the rental according to the market rate instead of just giving the 15% rebate.

Ms Grace Fu Hai Yien: Mr Speaker, if you will allow me just to clarify again. HDB has, in fact, reduced its market

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rental rate by 5% in January 2009. We do take into consideration market conditions.