GOLF COURSE LAND (Review of rentals and alienation)

Mr S. Chandra Das asked the Minister for Law whether the Government is reviewing the rentals for golf course land as well as the method of alienating such land and, if so, on what basis such review will be conducted.

The Minister for Law (Prof. S. Jayakumar): Mr Speaker, Sir, the Government provides land for golf courses in Singapore as a social amenity. It is part of our effort to upgrade our quality of life. Golf courses are both for Singaporeans to enjoy, and also help to attract talent and investors. They function as open spaces and green lungs in our urban environment. We have therefore allowed golf clubs to operate on land which is not needed for other uses.

Up to now, most golf courses have occupied land on Temporary Occupation Licence (TOL) with some exceptions, such as Raffles Country Club, Jurong Country Club and Seletar Country Club, which have fixed leases. Many golf clubs now offer transferable memberships. As golf has become increasingly popular, the value of these memberships has gone up. However, on TOL, golf club members have no security of tenure, and cannot be assured of the value of their memberships.

The Government, therefore, proposes to place existing golf clubs which are on TOL onto fixed term leases, with effect from 1st January 1992, and they are Warren, Changi, Tanah Merah, Keppel, Sentosa and the Singapore Island Country Clubs.

The leases will generally be for a period of 30 years. Wherever possible, provided the land is not required for other purposes, the Government will consider applications from the clubs to extend their leases, on terms to be negotiated, as the expiry dates approach.

As for rental revision, golf courses on TOL pay low nominal rentals, often set many years ago. Now that golf clubs earn substantial amounts from selling transferable memberships and collecting transfer fees, these rentals are no longer realistic. Since the Government supplies golf course land as a social amenity, it will not recover the full opportunity cost of the land, ie, what the land could earn if put to other economic use such as housing. However, like any other scarce resources, the land should be priced to reflect what it is worth as golf course land.

One indication of the value of golf course land is given by Raffles Country Club, which was developed by JTC. JTC paid $8.3 million for 145 ha of land. In addition, it has so far collected a net surplus of $57 million from the membership and transfer fees. This is after paying the full development cost of a 36-hole golf course. This suggests that the value of the Raffles Country Club land is about $65 million, or $45 per square metre.

A second indication is given by the recent tender for a piece of land at Xilin for recreational purposes. The winning tenderer, who intends to build a 36-hole golf course, paid $130 million, or $104 per square metre. However, the Government's view is that the Xilin price must be discounted before it can be applied to other clubs. This is because under the terms of the tender, the Xilin club is allowed to take in up to 49% of foreign members who, of course, are better able to afford high membership fees. In comparison, most of the other existing clubs have fewer than 20% of foreign members.

It would therefore be undesirable to force existing clubs to increase their foreign membership at the expense of Singaporeans in order to generate revenues to pay high rentals. The Government will therefore require golf clubs (other than Xilin) to reserve at least 70% of their memberships for Singaporeans and permanent residents. But as this is more restrictive than the terms for the Xilin land, golf clubs will be charged rental and property tax based only on 50% of the Xilin price. This will be further adjusted for factors like the location and quality of the course. The resulting rents are equivalent to a freehold value for golf course land of between $25 and $75 per square metre. In comparison, freehold residential land is worth $1,000 per square metre or more. The clubs will also have to pay property tax on their land and improvements, like other land owners.

To help the clubs adjust to these revisions, the new rentals will be phased in gradually over a period of 10 years. Initially, the clubs will have to pay only 10% of the economic rent, increasing to the full rent by the 10th year. Thereafter, the rentals will be subject to limited annual revisions, to reflect changes in the market value of golf course land.

Three clubs will be charged special concessionary rates: SAFRA's proposed country club, Sembawang Golf Club and the NTUC's proposed Orchid Country Club. They will pay 10% of the rental applicable to the other clubs. This is in recognition of the contributions of reservists and SAF personnel to Total Defence, and of the Labour Movement to the economy.

The clubs have been informed of the details of the lease terms.

Mr S. Chandra Das (Cheng San GRC): Mr Speaker, Sir, I have three supplementary questions for the Minister.

Firstly, I would like to ask the Minister whether the Government has any plans to assist smaller golf clubs if they are unable to pay the market rate of rental for the new leases. Secondly, would the Government allow clubs, like the Singapore Island Country Club (SICC), to make their memberships transferable? As of now, SICC cannot make the membership transferable. Thirdly, Sir, with the introduction of a market rental, membership to golf clubs would be more expensive. I would like to ask the Minister whether the Government has any plans to build public golf courses where Singaporeans who want to play golf can do so without paying fanciful entrance fees.

Prof. Jayakumar: Sir, the first supplementary question was about small clubs which may have difficulties in affording the lease. The way that we have approached this, as I have mentioned, a 50% discount in effect of the revised valuation, and a 10-year phase-in period where they start off in the first year with 10%, in our view, would enable most clubs an ample period to adjust and to meet the new rentals. I believe the clubs will be able, under this approach, to have enough time to adjust. Some may have to make some internal operational adjustments in order to raise revenue. There are many ways in which a club can do that, of course, either by increasing the membership, adjusting the subscription fees, reducing operating costs, or being more careful and stringent on capital expenditure. But, in any case, let me assure the Member that a committee has been set up and it is chaired by the Permanent Secretary, Ministry of Law, with representatives from other departments like Land Office, Ministry of Finance, Ministry of Trade and Industry and statutory boards. The purpose of this committee is to coordinate and oversee the implementation of this revised policy. Those clubs which, despite the discount and the phase-in 10-year period, would still have difficulties could discuss their difficulties with this committee.

I believe the second question was about membership transferability of the SICC. The SICC courses are on PUB land. Unlike other clubs, as the Member has pointed out, it has not had transferable memberships. With this move towards economic rentals and fixed term leases, the SICC officials have told us that they would wish to introduce transferable memberships. To this, the Government agrees. But some safeguards will be necessary because, with the change of policy, it will generate large sums of money into the club which must be properly husbanded and wisely managed. Therefore, PUB will allow SICC to offer transferable memberships on condition that PUB would be responsible for changes to the club's constitution and will appoint the key officers of the club. The club will, of course, retain all its profits and surpluses which, in the case of dissolution, will revert to charity. This is the same arrangement which PSA has with Keppel Club. We have put this proposal to the SICC and the initial response has been supportive.

The third question was about facilities for those who may not be able to afford the membership of existing clubs. Here I would like to make three points. First, the Ministry of National Development will be identifying a suitable site which it can then alienate to the Singapore Sports Council (SSC) to develop a 18-hole public golf course. To keep costs affordable, there will be no memberships and the facilities will be basic. As it would be for the use of the general public, this new SSC golf course will be treated on par with the Tanglin Golf Course, in other words, on nominal rental terms. The second point I want to make is that the PUB also has plans to construct sometime next year a 9-hole public golf course in one of the water catchment areas. Thirdly, I should also refer to the existing 9-hole course of the Seletar Country Club. The Seletar Country Club is actually building a new 18-hole course and it has to surrender the existing 9-hole course to the Government for the development of a business park. However, if by the time it has completed its new 18-hole course, the business park development plans are not finalized, then the Government will allow the interim use of this 9-hole course as a public course at a nominal rental. Therefore, in view of these plans, those Singaporeans who cannot join existing golf courses would still be able to afford to play the game.

Dr Lee Siew-Choh: Sir, in view of the unrealistic and low rentals, has the Minister ever estimated the amount lost in renting out land to the golf clubs in Singapore?

Prof. Jayakumar: We could probably ask the Chief Valuer to make some theoretical calculations, but I would also like to point out that most of these areas are located on land which cannot be put to other use and, in fact, we must bear in mind that the managements of the golf courses have, in fact, tended to, and looked after, the land for Government.