HOUSING AND DEVELOPMENT BOARD (Building of 4-room budget flats)

Dr S. Vasoo asked the Minister for National Development when plans for building 4-room budget Housing and Development Board flats will be implemented and whether the prices of these flats will be reasonable to enable more people to upgrade themselves.

Mr Lim Hng Kiang (for the Minister for National Development): Sir, the first batch of 227 units of smaller 4-room flats will be offered for booking in October 1993. These 227 units will be located in Choa Chu Kang and Woodlands new towns. These 4-room flats will have a slightly smaller floor area of 90 square metres as compared to 100 square metres, and simpler finishes than the standard 4-room flats.

The first batch of these 4-room flats will be priced around $70,000 to $93,000, which is about 18% cheaper than the standard 4-room flats. At such prices, households with monthly incomes of between $850 and $1,000 should be able to meet the monthly mortgage instalments for these 4-room flats entirely from their CPF contributions. These 4-room flats are therefore well within the affordability of lower income households.

Mr Heng Chiang Meng (Cheng San GRC): Sir, while the question deals with upgrading, and I believe that the system does a lot for people who wish to upgrade it, the system does nothing for people who wish to downgrade.

Sir, may I ask the Minister of State why does HDB make it difficult, for example, for families whose grown-up children have moved out, to sell off their flat because they want to downgrade to a smaller unit? This is also true for people who want to be financially secure because they foresee financial difficulties ahead. They would rather have some cash in their pockets than live in a flat which is too big for them. These people also wish to downgrade. After selling off their properties in the open market, they now find it difficult to buy smaller flats from the HDB. At the same time, Sir ---

Mr Speaker: Mr Heng, could you ask your question?

Mr Heng Chiang Meng: Yes. I am asking the question. Sir, why does the HDB system make it difficult for this type of people? In the meanwhile, while they are waiting for a smaller flat allocation and if they want to rent a flat, they could not do so. There is a policy, since 1st June 1993, that debars them for 30 months from renting a HDB flat. So after selling off their flats, these people find it difficult to rent a HDB flat while waiting for a smaller flat.

Mr Lim Hng Kiang: The public housing scheme is tailored to enable every Singaporean to own his flat. That is why it is a heavily subsidized programme. They buy their flats at heavily subsidized prices. Those who sell away their flats have already enjoyed a subsidy from the Government. To come back to the rental flats to enjoy a second subsidy, that is not what we want to encourage. But if any family has to downgrade because of financial problems, I can assure Members that such families would be allowed to rent flats at subsidized rates. So it is not true that the system penalises those who want to downgrade. In fact, we encourage people who have smaller families, after their children have grown up, to sell off their 5-room flat and buy a 3-room flat in the resale market. Keep the capital gains and live happily ever after.

Mr Heng Chiang Meng: Sir, does this mean that the HDB does not have smaller flats for people who want to rent at market rates, and not at subsidized rates?

Mr Lim Hng Kiang: The HDB is not in the business of renting flats at market rate. We provide houses for sale because we aim for a home-owning society. For those who are not able to afford it, we provide rental flats at subsidized rates so that they have a home of their own. For those who want to sell off their flats, they can easily buy a smaller flat. They have made quite a big capital sum and they can buy a smaller resale flat and still have a substantial capital gain for their old age.

Mr Heng Chiang Meng: Sir, may I repeat my question? Does HDB have smaller flats for rental at market rates?

Mr Lim Hng Kiang: HDB provides smaller flats for rental at market rates to two categories of applicants. One is for those who are applying for a flat for the first time and who need a flat for the time being. This is called the Transitional Rental Housing Scheme. It is tailored for a young couple who is buying a home for the first time and while waiting for the home, HDB rents the flat to them. Because their income is above $800 per month, they do not enjoy subsidized rental. So they pay market rental. The second category are permanent residents (PRs) or employment pass holders who come to Singapore to work and during the transition, when they are starting work, we also rent them a flat at market rate to tide them over this period. When they become PRs and they are allowed to buy flats in the resale market, they enter the resale market.

Mr Heng Chiang Meng: But then my question is very simple: why are these persons, who are Singapore citizens and wish to downgrade, not allowed to rent these flats at market rates? I do not think the element of subsidy is here because they are at market rates. After all, we are renting them to permanent residents who are not Singaporeans.

Mr Lim Hng Kiang: These Singaporeans who have already bought the flat have enjoyed a subsidy from Government and have made substantial capital gains. If they want, they can easily buy a flat in the open market. They can also apply for a new flat from the HDB, if this is their second time they are applying. There is no rule to prevent them from applying a second time. But we do not intend to build flats for rental because it is a decreasing segment and we want to encourage a home-owning society.

Dr Vasoo: Mr Speaker, Sir, coming back to my question, would the HDB be prepared to build more budget flats in anticipation of more 3-room families upgrading themselves?

Mr Lim Hng Kiang: HDB now builds based on demand. We will try out with these 227 units in October 1993. If there is overwhelming demand, showing that there is a sector of people who want these smaller flats, which is 18% cheaper, HDB will adjust its building programme accordingly to meet this demand.