HDB INDUSTRIAL/COMMERCIAL UNIT (Revision of rentals)

Mr Heng Chiang Meng asked the Minister for National Development whether the rent for a Housing and Development Board industrial/commercial unit is increased to the prevailing market rate if a sitting tenant changes its form of incorporation.

The Minister of State for National Development (Dr Lee Boon Yang) (for the Minister for National Development): Mr Speaker, Sir, I shall answer on behalf of my Minister.

In the management of its commercial and industrial premises, the HDB allows sole proprietors and partnerships to include partners without rent increase if the original partners retain controlling shares of at least 51% in the business. If the original partners retain less than 51% shares or assign the tenancies to third parties, the rent is revised to the prevailing market rate. The rent is not revised if it is already at the prevailing market rate.

Sir, the majority of HDB tenants are paying rents lower than the prevailing market rents. HDB has to revise the rents upon assignment of tenancies. If this is not done, the prospective tenants will enjoy the "profit rent", which is the difference between the existing rent and the prevailing market rent which he will not get if he has to tender for the premises.

As of now, when a sole proprietorship or partnership is incorporated into a private limited company, the rent is revised to the prevailing market rate as this is considered an assignment. Sir, however, the HDB is prepared to consider waiving rent revision on a written undertaking that the original tenant or partners will maintain at least a 51% shareholding in the private limited company.