HOUSING AND DEVELOPMENT BOARD (Number and profile of flats revested)

Dr Michael Lim Chun Leng asked the Minister for National Development what is the number and profile of Housing and Development Board flats that were revested by the HDB from 1988 to 1992 because of inability to continue with mortgage loan repayments.

Mr Lim Hng Kiang (for the Minister for National Development): Mr Speaker, Sir, between 1988 and 1992, action was taken to revest the titles of 2,269 flats because the owners were unable to continue with their mortgage loan repayment. The HDB examines each case carefully and offers assistance to the owners wherever possible. For example, depending on the circumstances of each case, HDB will, as far as possible, allow the owners with genuine financial difficulties to defer payment of their instalments for at least six months, or reschedule their loan repayment period up to a maximum of 25 years, or opt to pay the instalments under the easy repayment scheme such as paying 75% of the normal monthly instalment for the first five years.

Eventually, of the initial 2,269 flats, HDB only took possession of 366 flats as a last resort. Even for these 366 cases, HDB continued to render assistance by offering rental housing. About 90% of them took up the offer. The rest chose to move in with their relatives or friends.

The number of flats recovered is only about 0.1% of the number of flats under each flat type.

Dr Michael Lim Chun Leng (Cheng San GRC): Sir, can the Minister clarify what is the profile of the flats? Are they three-roomers mainly or also four-roomers and five-roomers?

Mr Lim Hng Kiang: Out of the 366 flats that were finally taken back, the majority were three-roomers which reflect the flat profile of the existing flats. There are cases of four-roomers, five-roomers and executive flats being revested.

Dr Michael Lim Chun Leng: What is the period of occupancy by these residents before they default on repayment? Can the Minister either give a range or a mean or median period?

Mr Lim Hng Kiang: The cases cover the entire range of HDB flat owners. Some people fall into arrears very early in their mortgage payments. Some have temporary financial difficulties and then fall into arrears. And despite the rescheduling of the loan, they cannot catch up with the repayment of the arrears and therefore have to give up the flat. Some have upgraded and find that they have upgraded beyond their means and then they have to give up their flat and downgrade. So it covers a wide range of cases.

Dr Michael Lim Chun Leng: Are there any preventive measures that are taken by the Ministry to actually prevent such revestment procedures from being undertaken because the revestment process is not only socially very traumatic for the family but also results in a net loss for the family? If the Ministry can study the household income profiles of these families, then perhaps there may be a certain household income which would alert the officials and these families can be specially counselled in terms of the repayment schedules and in terms of the downpayment, so that they will not have their flat revested, say, within a year of their buying the flat.

Mr Lim Hng Kiang: Let me explain to the Member that buying of HDB flats varies according to the many situations. Many home owners may not have CPF but they are able, and they continue to be able, to pay their mortgage payments through cash. If you look at their declared income or their CPF accounts, bona fide, they may not seem to be in a position to buy a 5-room flat. But I can assure you that many thousands of them continue to buy 5-room flats and continue to service their loans. There are many people who, on the basis of their income statement and their CPF, look able to afford a 4-room flat or 5-room flat, but because of poor financial management - they gamble, they drink, they squander away their money - they fall into arrears. There are many such cases. In the end, I think it is best that individual home owners decide for themselves what flat they are able to afford and which type of flat they should invest in. It is very difficult for Government to set up hurdles and say, "If you don't have such an income, you are not allowed to buy a 5-room flat."

Dr Kanwaljit Soin: Sir, would the Minister confirm that when the flat is revested or compulsorily acquired, the owners are compensated at the original price while the HDB then sells the flat later on at the posted price? Is that true?

Mr Lim Hng Kiang: The price at which the HDB acquires the flat depends on the period of occupation. If the owner has occupied the flat for more than five years, HDB will advise the owner to sell the flat in the resale market and pay back the arrears. That is the normal route most owners will take when they realise that they cannot continue to service the loan for such a big flat. And if they have stayed in it for more than five years, then they will sell it in the open market and pay the arrears. For flats which are less than five years, then HDB acquires it based on the original purchase price.

Dr Michael Lim Chun Leng: Mr Speaker, Sir, would the Ministry consider looking at the 366 flats that were revested and actually study the income profile of these families and perhaps that would give them an idea of the type of families that are likely to run into these problems? I think my main concern is those families who do not actually have the money to purchase the flat but went ahead without sound advice. Perhaps HDB could help out by providing some financial advice on some mortgage loan schedules before they sign to purchase the flat. If they can have a study of the household income profile of these families, perhaps there may be an income limit in which it will alert the officials to these types of families.

Mr Lim Hng Kiang: As I have already explained to the hon. Member, HDB has studied the income profile of these cases. We have been in this business for 30 years. There is no set pattern of people who can afford or cannot afford. Many of them were able to afford in the beginning. They make wrong career decisions, business decisions, they fall into arrears. Many people, on paper, would not be able to afford and HDB will advise them not to buy. I think they will all come to the MP and complain. It is their own business how they manage their funds. Many have got other avenues of income. They may not have a declared income or may not have CPF, but they all seem to be able to buy a 4-room or 5-room flat quite comfortably and service their loans. Should HDB come and say, "No, you are not allowed to buy because you do not have this prerequisite income level and CPF downpayment."?

Dr Kanwaljit Soin: Sir, would the Minister consider that if the owner has had the flat for five years and if the HDB buys it back from him, would they compensate him at the price that the HDB sells it to the next owner after claiming back arrears and all that is owed to the HDB?

Mr Lim Hng Kiang: In many of these cases which are 3-room flats, the original purchase price and the posted price are in fact the same. The posted prices for 3-room flats have not changed since 1981. So the Member's suggestion is in fact implemented today. We sell any acquired 3-room flat at the same price since 1981, and that is the price we pay anybody who has bought a 3-room flat from us in the last five years.

Mr Chng Hee Kok (Tampines GRC): Sir, can I seek clarification on this 5-year bar that the Minister has mentioned? In the event that there is a 3-child family, can the flat be sold at the market price even if the occupation period is less than five years, and the owners will be encouraged to sell the flat in the open market?

Mr Lim Hng Kiang: Sir, I think Mr Chng is using this opportunity to answer the query raised yesterday about his example. Since he has raised it, let me explain the situation.

In 1987, when the Government was encouraging families to have the third child, the Government gave two incentives in terms of housing policy. The first incentive is that we gave priority to people who qualify under the third child family. That means, if you have a third child and the third child was born after 1987, you would get priority in the allocation of a new flat. The second incentive is that you need not stay for five years in the old flat that you have already purchased. The scenario is that for a family with two children staying in a 3-room flat, we wanted to encourage them to have a third child. So we offered them a bigger flat, a 4-room or a 5-room flat under priority, and we allowed them to sell their 3-room flat without them having to stay in it for five years so that they could quickly have the third child before the window of opportunity closed.

Six years later, we find cases where, because of the waiver of the occupation period, it is now possible for somebody to say, "I am applying under the third child policy. I have a flat which I applied under the public scheme and because there is no five-year requisite period, I now want to sell it." This is the case which Mr Chng quoted yesterday. So what is wrong with that? Many Members were very outraged.

If you look at it in dollars and cents, what we are saying is that this person makes a capital gain of $100,000 to $150,000. He would have made a gain if he sold it five years later. But under the third child incentive, he is allowed to sell it four or five years ahead. He does not have to wait for five years, which means he gets an incentive of $200,000 to have his third child. But since it has caused so much outrage, we will have a look at it as part of the overall package for the third child and see whether this is a loophole that ought to be redressed.

Dr Kanwaljit Soin: Sir, before the Minister considers changing that policy, would he then consider allowing people whose flats have been compulsorily acquired to sell them at the market price so that they would then be able to make that extra money to pay the arrears to the HDB and not go into debt?

Mr Lim Hng Kiang: The policy is quite clear. If you stay beyond five years, you can sell it in the open market and repay the arrears. If you have not occupied the flat for five years, you have to sell it back to HDB at the original purchase price, unless you come under the special schemes like the third child policy.