PURCHASE OF HDB FLATS

PURCHASE OF HDB FLATS:

(Assistance in obtaining housing loans): 2.

Dr Muhammad Faishal Ibrahim asked the Minister for National Development what action has been taken to assist Singaporeans who are unable to obtain housing loans from commercial banks in the purchase of HDB flats.

The Minister of State for National Development (Ms Grace Fu Hai Yien) (for the Minister for National Development): Mr Speaker, Sir, since 1st January 2003, flat buyers who do not qualify for HDB concessionary loans can apply for a mortgage loan at commercial interest

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rates from the banks or financial institutions. Those who do not qualify for concessionary loans include private property owners, high-income households, non-citizen households, those who have previously taken two HDB loans, as well as those who have already enjoyed one concessionary loan and are not upgrading in their current flat purchase.

There is a wide variety of commercial loan packages available in the market. Generally, HDB flat buyers who have a stable household income and are buying a flat within their means should be able to secure a bank loan to finance their flat purchase.

However, there is a small group of flat buyers who are unable to secure a bank loan for various reasons, even though they may have the financial means to service a mortgage at commercial rates. They include those with poor credit histories or are undischarged bankrupts. To help meet the needs of this group of flat buyers, HDB has recently implemented an assistance measure to provide them with mortgage loans at commercial interest rates. As with other HDB loans, credit assessment will be applied to ensure financial prudence on the part of the flat buyer.

I want to clarify and emphasise that HDB is not re-introducing market rate loans as a mortgage financing option for flat buyers. This is a limited assistance measure extended to a select group of buyers who face difficulty in obtaining a bank loan to finance their flat purchase. HDB will assess appeals for these loans on a case-by-case basis, and we reserve the right to reject cases that do not meet our guidelines.

Dr Muhammad Faishal Ibrahim (Marine Parade): Mr Speaker, Sir, I would like to thank the MOS for giving a good answer.

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May I know how long does the HDB take to process an appeal for a HDB loan from a resident who is unable to obtain a housing loan from a commercial bank? This is because sometimes during my meet-the-people session, I meet residents who are concerned that they are unable to obtain HDB loans for the purchase of their next flat when they are not able to obtain a commercial loan. For some, their current flat is going to be repossessed by the commercial banks and they have enjoyed the allocated number of subsidy.

Mr Speaker: No speeches, Dr Faishal.

Ms Grace Fu Hai Yien: Mr Speaker, I would like to thank Dr Faishal for the supplementary question.

HDB will expedite such appeal cases. But, fundamentally, we would like, as much as possible, to encourage these buyers to explore the commercial market first. As I have clarified, it is not HDB's intention to re-enter this market with a loan at market rate. We are only there to help very exceptional cases and, in most cases, we have to be thoroughly assessing the situation and we have to satisfy ourselves that indeed they do not have any access to the bank market before we grant a loan. Concessionary rate loans are heavily subsidised, especially if we think about it over the loan period. Therefore, we view these as a subsidy. For us to offer another loan at market rate is really just to help the very few cases who we think genuinely have problems with access to bank market to find financing for their home.

Mr Cedric Foo Chee Keng: Sir, to the Minister of State, I can well understand why HDB wants to reduce its role as a financier and concentrate on its role as a developer. For the resources available to finance HDB flat purchases, would it not be more logical to channel them to downgraders who actually need them? Many downgraders who are facing

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financial difficulties wish to downgrade, which is a policy I think we would encourage, because this is financial prudence. Yet, they are unable to get bank loans. So, basically, they are stuck. Can the Ministry review that policy?

Ms Grace Fu Hai Yien: When we look at this assistance measure that we are putting in place, we are really looking at a very small subset of the applicants. Not all downgraders are not given access to financial market. Many of them, despite the need to downgrade, can access the bank loan market and, therefore, should do so. I would say that what we are doing now is to limit to a very small subset that not only could be looking at downgrading as an option but, because of their past problems - it could be bad credit histories or that they may be involved in litigation - that has basically barred them from accessing the commercial loan market. So this is really a small subset. I agree with the hon. Member that we have, in a way, to apply our subsidy very judiciously and, therefore, we are looking at a smaller subset that Mr Cedric Foo has mentioned.

Mr Chiam See Tong (Potong Pasir): Sir, banks require buyers to pay the first 5% in cash. Can this requirement be waived?

Ms Grace Fu Hai Yien: Mr Speaker, Sir, I believe this question is much better channelled to the banks. But since they are not here, I think it is not a question that MND is privileged to answer.