EXECUTIVE CONDOMINIUM HOUSING SCHEME BILL

4.05 pm

Order for Second Reading read.

The Minister for National Development (Mr Lim Hng Kiang): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Objective

The objective of the Bill is to provide the legal framework for the Executive Condominium Housing Scheme to be established. Let me begin by explaining why we are introducing Executive Condominiums.

Background

Private property prices rose by 42.2% in 1994 and 10.3% in 1995. A typical 100 sq metre new unit in a private condominium in a suburban location will cost around $650,000. To service such a loan to pay for such a unit would require a gross monthly household income or at least $10,000. Our young polytechnic and university-educated couples, who aspire to own private properties, find it increasingly difficult to afford such properties.

When private properties rose sharply in 1972, the Government introduced HUDC developments to meet the aspirations of our young professionals. In 1979, when the Government stopped building new HUDC flats, it introduced the HDB Executive Flats.

HDB Executive Flats do not quite meet the aspirations of our young, tertiary-educated couples. Furthermore, the queue is very long - more than 30,000 are in the queue. Last year, the queue grew at approximately 1,000 applications per month. There was thus much unhappiness and frustration because new applicants would have to wait a long time to be allocated their Executive Flats.

The sharp increases in private property prices in the last few years have again created a "sandwich class" of young people who are beyond HDB's income ceiling, but who cannot afford private property.

The Government could have reverted to building new HUDC flats again. But we have already embarked on the exercise to privatise HUDC flats. Instead of building new HUDC flats and privatising them later, the Government therefore decided to create a new housing scheme which would enable young professionals to move directly into housing of private condominium standard and which after some years would automatically gain private property status. As these new flats will be no different from private condominiums in terms of design and facilities, we have decided to call them Executive Condominiums.

Eligibility and Ownership Conditions

Executive Condominiums will be strata-titled apartments built by private developers, with facilities and finishes similar to new private condominiums. But for the first five to 10 years, they will be governed by some restrictions. These restrictions will bring down the price and help to make the Executive Condominiums more affordable.

In order to qualify for Executive Condominiums, applicants will have to meet eligibility conditions similar to those for HDB flats, such as citizenship, family nucleus and non-ownership of private property. But the income ceiling is raised to $10,000 to accommodate those who are beyond HDB's ceiling.

If applicants are discovered as having falsely represented their eligibility, the Bill gives the developer legal power to cancel their applications.

After they have taken possession of their flats and until the end of the first five years, the owners will be governed by restrictions similar to HDB flats. They must continue not to own private property, nor should they illegally sublet their flats. These restrictions are necessary to make sure that Executive Condominiums are owned by those who genuinely need them, and not for speculative purposes. If any contravention is discovered, the Government will have the power to take back the flat, or to prescribe penalties on the owner.

Executive Condominium owners will not be allowed to sell their apartments until the end of the 5-year period. At the end of the five years, the restrictions are lifted. The owners can then sublet or sell if they wish, or purchase other private properties. However, any sale to foreigners will be prohibited until the end of the 10th year. Again, this measure is to keep prices affordable. After the 10th year, this restriction will also be lifted, and the Executive Condominiums will be no different from private condominiums.

Affordability

Mr Speaker, Sir, the Government will not be providing HDB mortgage loans for the purchase of Executive Condominiums. This is because Executive Condominiums will be developed by the private sector, and not by HDB. Applicants will therefore need to seek their own financing from banks and financial institutions.

However, due to the restrictions I have mentioned, the land for Executive Condominium developments will be valued at about 30% below market price. The prices of Executive Condominiums will thus be lower and comparable to private condominiums. Based on preliminary calculations, this price difference would be around $100,000.

First-time applicants who have not enjoyed subsidised housing before will also be eligible for the $40,000 CPF Housing Grant. This will help to make Executive Condominium affordable to first-time applicants. In other words, instead of paying $650,000 for a private condominium unit, first-time applicants are expected to pay only $510,000 for an Executive Condominium unit of similar size, design, finishes and facilities. In other words, they enjoy the equivalent of a $140,000 market subsidy.

Developers

Mr Speaker, Sir, for a start, the land for Executive Condominiums will be directly alienated to the developers by the Government. Coupled with the discounted land price, this necessitates a strict policy on land allocation. Thus, in order to protect the Government and the taxpayers' interests, only wholly-owned Government-linked companies and non-profit-making organisations will be appointed to develop Executive Condominiums initially.

Pidemco has been appointed as the first developer, and NTUC has also formed a housing cooperative in order to undertake Executive Condominium developments. Other developers will be announced as and when they are identified. We aim to release enough land for about 2,000 units to be built per year as a start. We will adjust this figure in subsequent years depending on the response to the scheme.

In summary, the passage of this Bill will allow the Government to establish the Executive Condominium Housing Scheme. It will be another step in meeting the aspirations of younger Singaporeans to own private property.

Sir, I beg to move.

Question proposed.

Mr Chng Hee Kok (Tampines GRC): Mr Speaker, Sir, I rise in support of the Bill.

This housing scheme is timely as it enables a group of young and upwardly mobile Singaporeans more opportunities and easier access to private properties. Although I applaud the introduction of this housing scheme, I feel that the Bill has left open a number of issues.

First, the Bill seems to cover only the end-user part of the Executive Condominium Housing Scheme. No provision has been made on the land allocation to the developer - the developer's right to mortgage land, control on and end-pricing of the apartments and what are the pre-determined margins.

Currently, the HDB receives Government grants to buy development land from the Land Office at market values. The extent of the Government subsidy for public housing and the site allocation mechanism are therefore transparent. But there is no similar arrangement for the Executive Condominium scheme. Also, the Bill is not clear if the Housing Developers (Control and Licensing) Act and the Housing Developers Rules apply to the developers. In time to come, as the Minister has indicated, the Executive Condominiums will be privatised.

Second, it is unclear whether the power to sell to buyers who satisfy the eligibility conditions implies that such developers will either have to be given certain investigative powers to verify the truth of the buyer's statements as to their eligibility or that they will be assisted somehow in this process. Perhaps the Minister has in mind that this will be managed by the Housing and Development Board. If this is to be maintained by HDB, will the Executive Condominium Housing Scheme be perceived as just another HDB scheme which I think is not the Government's intention.

Thirdly, the power to re-possess the apartments of those who breach these conditions or die whilst waiting for their apartments within 10 years of issue of the TOP for the apartment needs further consideration. In the case of death, such situations should be distinguished from cases of wilful deceit and handled more sensitively. Why should the deceased's co-applicant who is also eligible for the Executive Condominium or his next-of-kin be dealt a double blow of losing a loved one and a home at the same time? An Executive Condominium is a very substantial investment and it appears grossly unfair for such an apartment to be re-possessed by the Government in the event of death of the owner.

Fourthly, since the concept of the Executive Condominium is intended to be the same as that of private housing, it is not clear in the Bill if strata title is to be given to these developments. If this is the intention, then provisions should be made for this and the incorporation of management corporations to manage the estate.

The administrative aspect of the Executive Condominiums after the minimum occupation period is over is also left open. Unlike the HDB flats which are naturally and logically handled by the HDB and the Town Councils, there is no similar mechanism or institution that Executive Condominiums can readily turn to unless it is the Government's intention to also let the appointed developer handle this as well.

Lastly, Sir, as the Executive Condominium is a major investment asset for Singaporeans, the amount of compensation to be paid for compulsorily acquired apartments is left entirely to ministerial discretion. This may be too arbitrary and I suggest that the Ministry should work out a formula and put this formula in place for arriving at the compensation for the purposes of more transparency.

Mr Chiam See Tong: May I ask the Minister to clarify certain points, Sir. He says 2,000 units will be built a year. Can I ask the Minister when will the first lot be built and where will it be situated? What sort of tenure do these buildings have? Is it going to be a 99-year lease or less than that?

As regards applications, there are a lot of problems in the application of HDB flats. Will it be the same for these Executive Condominiums or will it be on a first-come-first-served basis? If this is so, then you may find long queues overnight. Maybe the Minister can clarify these points.

Mr Lim Hng Kiang: Sir, I thank Mr Chng Hee Kok for his support of the Bill and I will address some of the issues raised.

The first point he raised was that the Bill addresses more the end-user and not the developers. As I have explained in my speech earlier, we are starting this scheme and the land will have these restrictions tied to it. We think this will require a 30% discount to the land price, but we are not sure. But to get the scheme going, we will get the wholly-owned Government-linked companies to start the project - Pidemco and also NTUC Co-operative. In this way, if we make any mistake in the land price, whether it is too high or too low, these two bodies will be in a better position to adjust than if it were a private developer.

Subsequently, it is our intention to put these sites on the market so that private developers can also develop with all these restrictions in place and over time a proper market value will be established for such properties. But to get the programme going, we need to appoint some developers in the first instance, and because it is land allocation directly alienated to the developer, we wanted to start conservatively with wholly-owned Government-linked companies and with NTUC Cooperative. But the intention is that the developer, having got the land in the first instance directly alienated by the Government and in later phases through open tender of the land, will develop just like any other developer and he would use his market assessment to make sure the design is marketable, the price is right and it will be transacted just as in the open market. So there is no reason for the Government to set pre-determined profit margins or to have any particular rules on the developers over and above what is existing under the Housing Developers Rules. So the developers developing this scheme will have to follow the rules just like any private developer in private developments.

We are confident that the prices will be competitive because whoever is developing the Executive Condominium has, on the one hand, the subsidy from the Government in that the land is 30% cheaper. On the other hand, he can only sell to people who are eligible for such properties, principally, Singapore citizens; he cannot sell to foreigners; with a family nucleus and household income of less than $10,000. So any developer building Executive Condominiums will find that he would have to price it competitively. He cannot price it too high because then he would not be able to find the market for that kind of property. So we are quite confident that the prices that we are talking about will be lower than comparable prices in the private condominium market today.

The third point that Mr Chng raised was whether the developers would be in a position to assess the eligibility of the applicants. Let me explain that HDB will assist the developers to process the applications so that all the eligibility criteria will be met.

Mr Chng also asked about the handling of the cases in breach of conditions of the sale, particularly in situations of death. Let me assure the House that we will handle this as sensitively as we handle HDB flats. There is no intention to re-possess the flat upon the death of the owner. As long as the surviving family meets the eligibility conditions, they will continue to retain the flat and they will continue to own the flat. What is provided in the Bill is in situations when the owner dies and the property, whether intestate or given to the next-of-kin, does not quite meet the eligibility conditions as laid down, then there is provision for the Government to recover the flat because the surviving family unit does not meet the conditions. Under such situations, the Government will lay down the regulations to make sure the compensation is transparent. The compensation will be based on the original purchase price or the current market price, whichever is lower. So the same rules will apply as in HDB flats.

The final query raised by Mr Chng was whether the units will be given strata title. Yes, they will be, and therefore they will also be managed by management corporations. All the rules which apply to strata titles will also continue to apply for Executive Condominiums.

Mr Chiam asked when will the first lot be built and where it will be put up. We plan to announce the marketing of the first lots of units some time in the middle of the year, in May or June. Pidemco has completed the design and is going through the various processes of getting Government approval to sell the units. So we are confident that the first lot of units can be marketed around May or June.

As we have announced sometime in September last year, the first lot of units will be marketed by Pidemco and the sites will be in Pasir Ris and Jurong East. We will announce subsequent sites to make up the first 2,000 units as and when we identify the developer and as and when the developer is in a position to present their designs and plans.

Mr Chiam also asked about the tenure of the flats. This will be for 99-year lease, just like any other sale of sites by the Government.

He also asked how we handle the applications. As we have explained in September last year, 80% of the units will be set aside for those in the existing HDB Executive Flat queue, according to their queue position. The remaining 20% will be open to new applicants on a balloting basis. So there is no need for an overnight queue. The reason for this is to make sure that applicants on the existing HDB Executive Flat queue will have a chance to buy the Executive Condominiums. But at the same time, we also keep 20% for new applicants who may not have qualified previously under the HDB income ceiling. Because the ceiling is now raised to $10,000, these applicants become eligible and therefore we provide an outlet for them to also participate in this programme. But this 20% is set aside and they will be balloted.

Dr Tan Cheng Bock: Can I seek a clarification from the Minister? Will the racial mix principle that we have in HDB flats apply also to these Executive Condominiums?

Mr Lim Hng Kiang: Sir, the ethnic ceilings will not apply to Executive Condominiums because it does not apply to private properties.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Mr Lim Hng Kiang].

Bill considered in Committee; reported without amendment; read a Third time and passed.