HDB FLATS AT POTONG PASIR ESTATE (Particulars of construction costs)

Mr Chiam See Tong asked the Minister for National Development (a) what were the values of successful awards for construction of Housing and Development Board flats at Potong Pasir New Town; (b) what was the number of units of flats built for each of the successful awards; c) what were the types of flats built for each of the successful awards; and (d) what was the average cost of each flat built in relation to the successful awards.

Mr Teh Cheang Wan: Mr Deputy Speaker, Sir, the values of structural works on contracts 1 to 7 at Potong Pasir Estate, inclusive of piling but excluding infrastructural, professional and administrative overheads, financing and land costs, are as follows: Contract 1 - $27,334,993.79 Contract 2 - $33,670,441.29 Contract 3 - $27,297,283.11 Contract 4 - $24,841,645.83 Contract 5 - $25,196,386.46 Contract 6 - $21,218,370.79 Contract 7 - $17,130,589.65 Total - $176,689,700 (rounded off) The numbers of flats built are: Contract 1 - 516 units Contract 2 - 614 units Contract 3 - 405 units Contract 4 - 532 units Contract 5 - 537 units Contract 6 - 558 units Contract 7 - 472 units Total - 3,634 units

The types of flats built for each contract are as follows: Contracts 1 & 2 - 3-room Model A, 4-room Model A and 5-room Model A Contract 3 - 3-room Model A, 4-room Model A, 5-room Model A and Executive Apartment Contracts 4 & 5 - 3-room Model A and 4-room Model A Contracts 6 & 7 - 3-room New Generation and 4-room New Generation

Based on the successful awards, the average construction costs of flats built, excluding infrastructural, professional and overheads, financing, and land costs, are follows:- 3-room New Generation - $31,100 3-room Model A - $42,700 4-room New Generation - $41,900 4-room Model A - $58,900 5-room Model A - $71,800 Executive Apartment - $78,500

I have earlier circulated to hon. Members a statistical table (Cols. 93 - 94) showing evidence of land value. The table lists ransactions of private residential land in areas comparable to Potong Pasir between March 1981 and March 1984. Based on the evidence, the land at Potong Pasir which as a permitted planning density of 706 pph, has been very conservatively valued at $1,500 psm. table - EVIDENCE OF LAND VALUE (Cols. 93 - 94)

Had the Government sold the land for Potong Pasir Estate, it would have fetched $1,500 psm. The imputed land cost for Potong Pasir Estate is therefore $255,356,800. In addition to the building cost, the HDB incurred the following costs in the development of Potong Pasir: Infrastructural Cost - $7,490,500 Professional and - $5,083,300 Administrative Overheads Financing Cost - $10,144,700

The total development cost, inclusive of land cost, was thus $454,765,000.

The total proceeds from the sale of the 3,634 flats was only $228,380,000. Therefore, the Government subsidy for the development of Potong Pasir Estate amounted to $226,385,000. This works out to a subsidy per flat of $62,296 or 99% of its purchase price.

It is the Government's policy to keep public housing at prices within the reach of Singaporeans. However, even if the Government continues to provide heavy subsidies for public housing, the present pace of building 40,000 new dwelling units a year cannot be sustained indefinitely. The simple reason is that Singapore has only a finite land area. At the present pace of construction, all available land for 400,000 units of public housing will be exhausted in 10 years' time.

These additional 400,000 units plus the rebuilding of the older HDB rental blocks can provide enough units to meet the Government's aim of a 100% house ownership society. However, when the land bank is used up, and Singapore has to depend on land obtained from the demolition and rebuilding of old HDB blocks or other built-up properties, the prices of flats will rise steeply. In other words, those who come on to the housing market after the land bank is. used up, must either inherit a flat from their parents, or buy an existing flat at free market prices then prevailing. The question Singaporeans face is how to modulate or moderate this transition from very heavily subsidized HDB prices to free market prices after all land which is available for public housing is used up.

This problem is being studied by a Ministerial Committee, comprising Mr Dhanabalan, Mr Ong Teng Cheong, Dr Yeo Ning Hong and myself.

Mr Chiam See Tong (Potong Pasir): Supplementary questions, Mr Deputy Speaker. As I see it, the figures given by the Minister from the successful awards are in fact very much lower than the prices of flats sold at Potong Pasir. A 3-room flat is sold at $52,200; a 4-room flat is sold at $59,600; a 5-room flat is sold at $115,700; and an Executive Apartment is sold at $145,600. These prices are way above the prices of the 'successful awards quoted by the Minister.

The second question, as regards his -

An hon. Member: What is your first question?

Mr Chiam See Tong: The first question is, therefore, the construction cost is in fact lower.

An hon. Member: It is not complete.

Mr Chiam See Tong: Is it not true then that the construction costs of these flats are in fact much lower than the prices quoted by the HDB?

My second question is on the various costs, ie, the infrastructural cost, professional fee, financing cost, the total development cost. Could the Minister give a breakdown of the cost per unit of flat in regard to all these additional costs?

My third supplementary question is: have these figures been verified, checked and certified by the Auditor-General or are they the figures of the HDB? In fact, I have other questions but, for the time being, I think these three questions will be sufficient.

Mr Teh Cheang Wan: Mr Deputy Speaker, Sir, it appears that the Member for Potong Pasir has only absorbed part of my answer which I gave just now, ie, on the construction cost, and he appears not to have absorbed the other parts. In the building industry, the total cost, as I have stated in my answer, is the structural cost, the land cost, the infrastructural cost, the financing cost, the professional fees. These added together form the total cost of the flat. If he is just taking part of the costs, then it does not constitute the total cost. It is just like when a person is going to buy a motor-car, say, a Mercedes-Benz 190. He asks the salesman of the firm, Cycle & Carriage, which sells the car, "What is the cost of these four tyres?" The salesman says, "These four tyres cost $600." Then he says, "This is most unreasonable. The tyres cost $600. How can you sell the car for $100,000?"

Mr Chiam See Tong: Mr Deputy Speaker, will the Minister please answer the first question?

Mr Deputy Speaker: Please remain seated, Mr Chiam.

Mr Teh Cheang Wan: I am answering the question. I am just illustrating that if a person is asking for the cost of a car, it must be the cost of the whole car and not just the cost of the four tyres. So if the Member for Potong Pasir is asking for the cost of the flat, as I have stated here, it must be the construction cost, the infrastructural cost, the financing cost, the professional fees and, most important of all, the land cost. I have added up all the costs for him to show that the subsidy is extremely heavy because the subsidy provided by the HDB constitutes 99% of the selling price of the flat. I have stated this very clearly.

His second question about individual unit cost -

Mr Chiam See Tong: Mr Deputy Speaker, Sir, the Minister has not answered the first question, whether or not the construction cost is in fact lower than the selling prices of the flats.

Mr Deputy Speaker: Mr Chiam, will you please resume your seat and allow the Minister to give his reply? If you are not satisfied, you may pose another supplementary question. Carry on, Mr Teh.

Mr Teh Cheang Wan: Mr Deputy Speaker, Sir, I have answered the question quite clearly. When a person buys a car, he does not just ask for the price of the four tyres. He asks for the price of the whole car.

Mr Chiam See Tong: You keep on repeating.

Mr Teh Cheang Wan: Because the hon. Member for Potong Pasir repeats the question and I have to repeat the same answer.

Mr Chiam See Tong: Construction cost is higher than the selling prices of flats.

Mr Teh Cheang Wan: Construction cost is higher than the selling prices of flats. Of course, and if the Member for Potong Pasir adds the other costs, it would be much higher. It is just like when a person is buying a flat from any private developer. He cannot ask the private developer what is the structural cost of the flat. Of course, the private developer will say, "No. My cost is not just for the structure alone. It must include the architect's fee. It must include the infrastructural cost. It must include land cost and it must include my financing cost. That is my total cost."

Mr Chiam See Tong: I am talking about construction cost.

Mr Teh Cheang Wan: The Member for Potong Pasir is talking about construction cost. He cannot buy a flat without the infrastructure, without the architect preparing the plan, without the land. What is he buying? He must buy the flat with the whole infrastructure.

An hon. Member: Buy a piece of land.

Mr Teh Cheang Wan: The second point is about the unit cost. I can apportion the unit cost for the Member for Potong Pasir. Or he can work it out himself. It is the total cost divided by the number of units. If he wants the cost of each individual unit, I can apportion it out and I can send it to him.

Sir, on the point about whether or not HDB's accounts are audited by the Auditor-General, the answer is yes. Every Annual Report of the HDB must be audited by the Auditor-General. In fact, all the Members in this House have received a copy of HDB's Annual Report. In the Report there is a statement of accounts which is properly audited and certified by the Auditor-General. My answer to his third question is yes.

Dr Augustine H.H. Tan (Whampoa): Mr Deputy Speaker, Sir, am I correct in drawing the following inference from the Minister's figures? Of the total proceeds of $228.3 million from the sale of flats at Potong Pasir, $176.6 million is actual construction cost, $23.3 million constitutes the infrastructural, professional, administrative and financing costs, which make a total of almost $200 million, which leaves $28.4 million for imputed land costs. And this figure of $28.4 million, compared with the actual conservative market value or cost of the land of $255 million, is only 10% of the actual market value? In other words, the Government is, in effect, subsidizing 90% or more of the land cost itself.

Mr Teh Cheang Wan: Mr Deputy Speaker, Sir, the answer to the Member for Whampoa is yes.

Mr Chiam See Tong: The Minister has said in this House that the construction cost of the HDB flat is in fact higher than the selling prices of the flats. If I remember correctly, during the Budget debate, there was an allocation of $5.149 billion for the HDB and, out of that, $149 million was given as grants to the HDB. In other words it is a gift to the HDB. If this grant is given other than for development, can the Minister tell this House what is this grant for? Is it not for professional fee, for the infrastructural cost and for other expenses in running the HDB? Therefore, can he take into account all these other costs?

The second question is: can he define exactly what is construction cost?

Mr Teh Cheang Wan: Mr Deputy Speaker, Sir, it appears that the Member for Potong Pasir has not read or does not understand the accounts. The Annual Report shows quite clearly how this grant or Government subsidy is arrived at. In the old accounting system, the HDB usually incurs a deficit. In other words, the HDB's income is less than its expenditure and the deficit is being subsidized by Government in the form of a grant. This is the grant given annually by the Government when the HDB suffers a deficit in its income and expenditure. If the Member for Potong Pasir does not quite understand this grant, I would suggest that he goes back and read the HDB's accounts.

Mr Chiam See Tong: I am not asking for myself. It is for thousands of my constituents.

Mr Teh Cheang Wan: Since the Member has some accountants, if I remember correctly reading it in the papers, assisting him on the preparation of the 19 conditions which he sent to me, they would be able to enlighten the Member for Potong Pasir how that subsidy has been arrived at. Very simply, the housing subsidy granted by the Government is the difference between the income and the expenditure in the HDB's accounts.

Mr Chiam See Tong: What about construction cost? How do you define it?

Mr Deputy Speaker: Mr Vasoo.

Mr S. Vasoo (Bo Wen): Mr Deputy Speaker, can I proceed with my question? Question No. 5, Sir.

Mr Chiam See Tong rose -

Mr Deputy Speaker: I am sorry. We are proceeding to Question No. 5 already.