CENTRAL PROVIDENT FUND (Use of contributions for purchase of private housing)

Mr Ng Kah Ting asked the Minister for Labour whether he will allow Central Provident Fund contributors to make use of their balances for the purchase of private dwelling houses, and, if so, when the scheme will be implemented.

The Acting Minister for Labour (Mr Sia Kah Hui): Mr Speaker, Sir, this matter has been raised several times in the House since 1971 and each time the request has been turned down. The Ministry of Labour and the Central Provident Fund Board have also received numerous appeals from members of the Fund to allow them to use their CPF savings to buy private residential properties. The Government has now decided to allow CPF members to use their savings in the Fund for the purchase of private residential properties.

Some hon. Members: Hear, hear!

Mr Sia Kah Hui: The objective behind this decision is to help CPF members, who are either ineligible for public housing or who do not prefer to live in such publicly-built flats, to own private residential property. This will also enable them to invest their CPF savings in residential properties to hedge against inflation.

Under this scheme, members who are not undischarged bankrupts will be allowed to use their CPF savings to buy one residential property regardless of whether members own commercial or other residential property. The scheme will be implemented in two phases.

In the first phase, which will come into effect on 1st June 1981, a member will be allowed to use up to 90% of his CPF savings in the Ordinary Account to redeem the whole or part of the outstanding mortgage on one residential property. He will also be allowed to use up to 90% of the monthly CPF contributions paid for him to his Ordinary Account towards the monthly instalment repayment of the remaining mortgage loan. This scheme will, however, not apply to any mortgages which were executed after the property has been purchased outright by the member or where a previous mortgage on the property has been discharged by the member. This is to prevent members who have already paid for their properties from taking advantage of the scheme.

In the second phase, which will come into effect on 1st January 1982, the scheme will be extended to allow a member to use up to 90% of his savings in the Ordinary Account for the purchase of a private residential property. If a member's CPF savings are insufficient to pay for the purchase of the property, he will also be allowed to use up to 90% of the monthly CPF contributions paid for him to the Ordinary Account to meet the monthly instalment payments on the property.

The property purchased with CPF savings may be used either for a member's own occupation or for rental. Members, however, will have to ensure that such properties purchased with CPF savings are not used for immoral, illegal or other unauthorised purposes. Failure to observe this condition renders the property liable to possession by the CPF Board. Such property possessed by the Board will be sold to ensure recovery of the amount withdrawn from the CPF plus interest. Further, a sum not exceeding 20% of the sale proceeds will be forfeited to the Board as a penalty.

Members who purchase properties under the various approved housing schemes will also be subjected to CPF rules governing the use of CPF savings in addition to those imposed by the respective housing authorities including those governing ownership and use of the properties.

Members in the immediate family, namely, spouse, parents and children in any combination and children of the same parents who wish to purchase a property jointly will be allowed to use their CPF savings for the payment of that property. Any member who has used his CPF savings for the purchase of the property jointly with members of his immediate family will not be allowed to use his CPF savings to purchase another residential property.

Properties qualifying for the use of CPF savings under the scheme must be on freehold land or where they are on leasehold land the lease must have at least another 75 years at the point of use of CPF funds.

Properties purchased under the scheme may be sold at any time. However, to prevent speculation a member who has sold his property will be barred for three years from using his CPF savings again for the purchase of another property. The time bar of three years will, however, not apply to a member who has used his CPF savings to buy HDB or JTC flat. In such a case, he will be allowed to use his CPF savings to buy a private property upon the sale of his HDB/JTC flat. The time bar of three years will also not apply to a member who has used his CPF savings to buy a property jointly with other members in his immediate family. Such a member will be allowed to use his CPF savings to buy another property upon divesting his investment in the jointly-owned property.

When the property purchased under the scheme is sold, the proceeds of the sale or the amount of CPF savings withdrawn plus interest, whichever is less, will have to be returned to the member's account if he is not yet qualified to withdraw his CPF savings.