HOUSING AND DEVELOPMENT (AMENDMENT) BILL

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."

Sir, the Bill seeks to amend the Housing and Development Act in three main areas: first, to empower the HDB to raise loans inside and outside Singapore through the issue of bonds and other financial instruments; second, to remove insolvency protection attached to HDB flats in cases where the flats are wholly owned by Singapore permanent residents; and, third, to confer upon HDB limited power to acquire individual strata units within HDB buildings for the specific purpose of upgrading the buildings.

First, the issue of bonds - clause 8. The Bill seeks to enhance HDB's flexibility to raise loans from a wider range of sources in any way it deems advantageous. At present, HDB's development programmes and operational requirements are financed mainly by Housing Development Loans provided by the Government. With the passing of the Bill, HDB will launch its first bond issue in the later part of this financial year to fund part of its housing development programme.

By tapping the bond market, HDB can reap the benefits of a more efficient financing structure that closely matches its development expenditure needs. The issuing of bonds by statutory boards will also help broaden and deepen the Singapore bond market, adding to its diversity.

Let me now turn to the protection of HDB flats owned by Singapore permanent residents - clauses 6 and 10. The present Act protects all HDB flats whether owned by Singapore citizens or Singapore permanent residents (PRs) from being vested in the Official Assignee following the bankruptcy of their owners. It also provides that no HDB flat shall be sold by court order to satisfy a judgment debt. The Bill proposes to remove such protection in cases where HDB flats are wholly owned by Singapore PRs. We want to restrict the scope of the Act in so far as the issue of immunity from insolvency law is concerned to make a distinction between Singapore citizens and Singapore PRs. The amendment will cover all Singapore PR flat owners regardless of when they might have purchased their HDB flats. However, it will apply only to persons who are declared bankrupt after the commencement of the amendment Act.

The third change is the acquisition of HDB flats for the purpose of the Main Upgrading Programme - clause 7. The Bill also seeks to incorporate a new provision in the Act to confer upon HDB the limited power to acquire individual strata units within HDB buildings for the specific purpose of implementing the Main Upgrading Programme (MUP). This will be necessary in order to build additional features in some MUP projects. For example, in blocks with no void decks, the ground floor units may need to be acquired and cleared in order to set up communal facilities not provided for in the past, such as a kindergarten or an old folks' corner. Let me assure Members that compulsory acquisition will be carried out only after careful evaluation of the various possible options. Furthermore, the final decision lies with the residents of the block in question who will vote for the MUP package that they prefer. The flats will be acquired only if 75% or more of eligible voters are in favour of a particular upgrading package which involves such acquisition. HDB will give the affected lessees a fair compensation package based on market value similar to that given under the Selective En-Bloc Redevelopment Scheme. In this way, affected lessees will not lose out as a result of the compulsory acquisition.

Sir, in addition to the three main amendments I have touched on, the Bill also includes administrative changes to enhance HDB's enforcement of public housing rules and policies. The Bill empowers the Minister to make rules to regulate the carrying out of renovation in properties sold by HDB to ensure compliance with building and safety regulations. This is provided in clause 4. Next, the Bill empowers the Minister to make rules to require that all agreements for private sales of HDB flats shall be in a prescribed form and that all other forms of agreement shall be void. The purpose of this amendment is to protect both buyers and sellers of HDB flats. Another amendment aims to curb speculation by providing that Sales and Purchase Agreements entered into before the seller has occupied the flat for the minimum occupation period shall be void.

To improve operational efficiency, the Bill allows HDB to appoint a wider group of persons to sign conveyancing documents on its behalf. This is in clause 2. It also streamlines the procedure for the appointment of HDB's Chief Financial Officer as this post is similar to HDB's other Heads of Department in that all are responsible to the Chief Executive Officer, who in turn is responsible to the Board. Furthermore, the Bill allows HDB, with the approval of the Minister, to enter into and carry out agency agreements that do not relate to housing or building ancillary services.

Sir, I beg to move.

Question proposed.

Mr Lew Syn Pau: Mr Speaker, Sir, I rise to support the Housing and Development (Amendment) Bill. However, I do have some concerns on two of the three main proposed amendments.

This Amendment Bill introduces a new provision in the Act to empower the HDB to raise loans inside and outside Singapore through the creation and issue of bonds or otherwise. I would like to ask the Minister how this provision, which gives the HDB added flexibility to raise funds, would translate into better pricing of HDB flats for Singaporeans. Does borrowing from the market mean higher costs versus borrowing from the Government? Currently, how does the Government charge for funds extended to the HDB for its housing programmes? Since the Singapore Government has very large reserves, does it not make sense to borrow from the market only when the Government reserves are in fact earning more than the cost of borrowing from the market?

Secondly, are these bonds targetted at institutional or retail investors? For the issue of bonds in Singapore, I would like to urge the HDB to consider issuing these bonds in smaller denominations of, say, even $10,000, so that the Singaporean retail investor can also participate in these bond instruments. This would give the man-in-the-street another avenue to invest his surplus funds which, I believe, will give a slightly higher yield than fixed deposits.

Next, the HDB, together with the MAS, should help to create a more liquid secondary market for these bonds for the benefit of retail investors. The HDB should also apply to the CPF Board to allow the use of CPF funds for such investments. Such instruments give a fixed income at much lower risk than the equities market.

The amendment to section 65J of the Act confers on the HDB the power to compulsorily acquire the whole of any particular flat in the precinct for the purpose of those upgrading works to be carried out in that precinct. I am very concerned about how this provision will affect certain individual owners who have lived in the precinct for many, many years. One could argue that he would be giving up his flat to benefit the majority, who might be given a kindergarten or an old folks' corner to utilise and enjoy. However, this provision should be used very, very judiciously, and perhaps only with the support of the local Member of Parliament. We should balance the right of the individual to continue living in the precinct that he has chosen many years ago, with the public good and interest. In the case of the acquisition of homes for roads or MRT lines, for example, it is more obvious that many thousands will benefit from the acquisition. In the case of acquisition of a flat for some communal facility, the number of neighbours who will benefit is much smaller and, in my view, less justifiable.

If such an acquisition is deemed absolutely necessary for whatever reason, I feel that the compensation should not be at the last transacted price of a similar flat in the precinct or block, or even the average of the last few transactions, but at a significant premium above the market. This will make the HDB think very carefully before acquiring. It will also compensate the affected owner who has to move away from the neighbourhood he has grown accustomed to.

Apart from these two comments, I have no other comments on the Bill.

Mr Ong Kian Min (Pasir Ris): Mr Speaker, Sir, I support the Bill, in particular the provisions enabling HDB to issue bonds as this would have the added benefit of contributing to the development of our capital markets. However, I would like to seek clarification on the amendment set out in clause 7 of the Bill in relation to the compulsory acquisition of flats in upgrading projects.

HDB upgrading programmes have, in general, met with good public response since its introduction. Many owners of upgraded HDB flats testify to the greater enjoyment of their improved homes and surrounding environment as well as the appreciation in the values of their flats. This is despite the fact that inconvenience and disruption may be caused to carry out the upgrading works. For example, it is sometimes necessary to gain access into individual flats in order to carry out the works on other parts of the building. In such cases, the Board is presently empowered under section 65J of the principal Act to authorise entry into any flat for the purpose of carrying out such works. Under the proposed amendment to section 65J, the Board is to be given a further power to compulsorily acquire HDB flats for upgrading works to be carried out in an approved project. In view of the broad wording of this section, could the Minister give assurance to the House that this power of acquisition will not be exercised by the Board for situations other than those which he had mentioned just now?

One fear I have is that for practical reasons, the contractor may wish to have access to a particular flat to carry out upgrading works to other parts of the building and therefore it may be expeditious for the contractor to lobby the HDB to acquire the flat for him to carry out the works in other parts of the building. Could the Minister assure us that this will not be the case and that the power of compulsory acquisition will not be exercised in such situations?

Where the flat unit is needed to become part of some communal facilities under the upgrading plan, the flat, as the Minister has pointed out, would be acquired by the HDB for the use of the flat to be changed. The main concern of the flat owner would then be the amount of compensation which he will receive. In this regard, could the Minister clarify the basis upon which HDB will determine the compensation to be paid? Would the quantum of compensation be based on valuation of the unit as an HDB flat as provided by qualified HDB valuers, or its value as part of a kindergarten or senior citizen's corner, for example? Further, the new subsection 9 provides that the owner may object to the compensation offered by the Board by stating his grounds in writing. I have some queries in relation to this issue. What are the grounds of objection which can be validly raised by the owner? Is it a valid ground that the market valuation obtained from qualified HDB valuers is higher than those offered by the HDB?

Sir, I have raised the above issues in relation to the compulsory acquisition of flats because I feel that it is important for the public to know when and how they may be affected by this power to be given to the HDB to acquire the flat. While the actual number of flat owners who will be affected is likely to be very small, I believe these issues should be clarified to prevent any misconceptions which may affect the support given by HDB flat owners for upgrading projects in their precinct. For example, as the Minister has clarified just now, whether to proceed with the upgrading works will be left to the residents and they have to obtain more than 75% of the votes of the residents before they can carry out the upgrading programme. But to the aggrieved flat owner whose unit is to be acquired by the HDB, it is no comfort to him to think that the majority of the residents of the estate would of course want the HDB to acquire his flat for some communal facilities which will be of benefit to the majority of the residents. After all, the money for the compensation will be paid by the HDB, and not out of the upgrading project budget, or out of pockets of the majority of the residents.

Mr Chiam See Tong: I am surprised to note that the HDB needs to issue bonds as an alternative source of funding. The traditional way of HDB funds is from the Government. They get a loan from the Government and they pay an interest. This loan is used to build HDB flats and in turn the flats are sold to members of the public. Once the profits are taken in, the Government is repaid their loans. I am just curious why at this stage funds have to be raised from outside Singapore or from other sources other than Government funds. My question is: Have the Government funds in fact been dried up that there are no Government funds now to finance HDB projects? Or is it because of the bad economic times that funds are short because the Government has to help out in many areas? We have noted that even the upgrading programme of the HDB has to be slowed down. So my curiosity is aroused. Why is there a need to raise money other than from the traditional source?

The other area that I would like to comment is this new draconian clause 7(b) whereby the HDB is given new powers of acquisition. My fear is that once compulsory acquisition powers are given to the HDB, we are opening the Pandora's box. Now the HDB can tell members of the public that they are acquiring only a flat on the ground floor and making more provisions for the other flat dwellers. But who knows, in time to come, this power can be used very liberally because in new subsections 7 to 14, which give power to the HDB to compulsorily acquire a flat, nowhere does it say that these powers cannot be extended. This is the fear of the public that once these powers are given, we are opening the Pandora's box.

In the past, the HDB has renovated and upgraded hundreds of flats. Why was there no need to have this power of acquisition? Why is there a necessity now to compulsorily acquire a flat? Are there that many cases that the Minister has mentioned, ie, these flats that are in the void decks? As far as I know, I have not come across any of such flats. Can the Minister name where these flats are situated in Singapore?

What about the occasions when a flat is needed for the construction of a block? Can this flat be also compulsorily acquired if the upgrading cannot be proceeded with unless that flat is acquired? I would imagine that, if that is the case, it would be a more compelling and cogent reason, and not just to acquire a flat for the benefit of the other flat dwellers. This exercise of compulsory acquisition must be rarely used. Can the Minister assure us that all possible remedies or solutions would be sought first before a flat is to be acquired?

Also in regard to the procedure of appeal, the appeal is only to a Minister, and one would imagine that a Minister is an interested party, if not in that flat, at least in that block or in that project. Appeal must normally be made to an independent body, rather than to a person who has interest in the project. So I would suggest that the final appeal must be to the High Court, even after having gone through the Minister. I think it is fair because a person's home is being taken away from him. The final appeal must be to a higher authority which has got no interest whatsoever on the matter.

As regards the payment of compensation, again the section seems to be rather unsatisfactory. Because it does not spell out how compensation is to be paid, what amount and if the amount is to be given, at what date that amount will be taken. Unlike the Act on compulsory acquisition of land, there is a cut-off date. So the amount is fixed, say, on 1st January 1975, or 1995, or whatever date is given. But in this case, there is no cut-off date. So in times of plenty, the HDB may be very generous but in hard times like these, the flat owner may be given a small amount. And if that happens, he will suffer twice. Firstly, his flat will be acquired and, secondly, he will be paid a derisory amount. I hope the Minister would have a second look at this particular clause.

Mr Shriniwas Rai: Mr Speaker, Sir, thank you for giving me this opportunity to speak.

Sir, I am in support of the Bill. But there are certain provisions which I have my reservation. I support the move to protect only the citizens. Only citizens should have the benefit of the Bankruptcy Act. I think this piece of amendment should have been introduced long ago. I suppose initially only citizens could buy a property, but subsequently there were some amendments allowing PRs to purchase it. I think there should be a distinction between citizens and non-citizens, and I support the Minister that it is a right move at the right time.

Sir, I also support the new section 49A. It would have a standard form of contract. This will allow for certainty. It would also save the purchaser, instead of going to lawyers, and he would know what he is expected to meet. I only hope when this standard form of agreement is drawn up, it will be favourable to both the purchaser and the seller.

However, I must raise my objection to new section 65J, and Mr Chiam has mentioned it earlier. I have no objection at all that the Government acquires a property for the common good of the community and the country. I think we have to upgrade and I must compliment the Minister and his Ministry for having done such a good job. Those areas which I have visited and which have been upgraded have really benefited from this upgrading scheme. But clauses 8, 9 and 10 are not very satisfactory. I will go further than what the earlier Members have mentioned. HDB is going to acquire a property and it is going to be judged in its own course. Every law student and lawyer will tell you that you cannot be judged in your own course. Here the Board is going to acquire a property and tell you how much it is going to be, and that is not fair. I think a fairer solution would be to have an independent panel and that panel can decide what is a fair compensation. Because not only you must not be judged in your own course, there is also another principle of law that justice must not only be done but seen to be done. I have no doubt whatsoever that the HDB will act bona fide. But the public, the majority of Singaporeans in HDB flats, must be assured that the compensation they are going to be paid is a fair compensation. And I share the view of my learned friend, Mr Chiam, to have an independent panel. There is already an existing provision for a Land Acquisition Tribunal. Or you may set up another tribunal. So for a member of the public, I think there would be very unhappy circumstances to have a clause where you raise an objection and the Minister considers and gives his decisions, and it is final. The Minister cannot be judged in his own course. And in order to provide for the right of the HDB flat owners, the Minister may want to consider some other solution.

Sir, it may be a bit too late at this stage to have the Bill amended but, nevertheless, I would urge the Minister to consider the position of setting up some panels or at least there should be mechanism in the HDB itself where members of the public could sit in this panel and they could see that a fair hearing and a fair consideration are given to the property that is being acquired.

With these reservations, Sir, I support the Bill.

Mr Simon Tay: Sir, I share the concern of the speakers before me as regards the powers of acquisition. Clearly, there are provisions under the existing laws for either general acquisition of land or the Selective En-bloc Redevelopment Scheme. I am not sure that we need to add another specific power to the various powers that already exist.

I am particularly concerned, Sir, that the criteria for the exercise of powers are not made clear in the statute. In the Minister's statement, the reasons he gave us were perfectly reasonable but not being in the statute, we cannot be sure that this will always be so. I would suggest, therefore, that subsidiary legislation or regulations should be promulgated to set out the criteria. These criteria would serve not just to reassure people but would also therefore serve as relevant criteria to take the objections, from the owners, that is, if they should object.

Additionally, Sir, I would suggest that another mechanism that may be of use to the Minister in exercise of these powers is to provide by policy that before any acquisition is made pursuant to this power, a public social impact statement should be made: that is to say, in any particular case, the situation, the upgrading plan should be studied thoroughly and a public document issued stating how many blocks are affected, for what purpose, and this would give a much better ground for people to make the decision that would vote yes or no for the upgrading.

Sir, the Minister offers us a 75% voting ratio for upgrading as a safeguard. This is usually sufficient. But in the event that those affected would be less than 25%, the 75% could be easily obtained by those who benefit even if all those who were affected would say no. In this regard, I think the best safeguard would be to require a double majority; that is, the existing 75% of all occupants to agree to upgrading and a certain percentage of those affected. Some might say those affected will, of course, not agree, but as the Minister says, if the compensation is fair and attractive, then perhaps a certain percentage would. This percentage could be lower than 75% of course.

The compensation quantum needs also to be thought through more carefully. I think that, given the context of upgrading, the first question must be whether this compensation would be on pre-upgrading criteria or post-upgrading criteria. After all, the purpose of the upgrading is to increase the value of the assets. Those stripped of an asset before upgrading will then be double losers - they lose the asset as it is and they lose the chance to upgrade the asset. And surely, Sir, that cannot be a point of upgrading.

Sir, a few months ago, we looked at a very similar law as regards the Land Titles (Strata) (Amendment) Bill. Very briefly, one of the key differences between that provision and this is of a reference to a third party for mediation or otherwise to try to settle the matter. I would encourage the Ministry to think of including such third-party measures, if not as law, then, again, as a matter of policy.

Mr Lim Hng Kiang: First of all, let me thank Members for raising the various points. Let me just address the point on issuing of bonds. Let me assure Members that this idea of issuing bonds is not because Government funds have dried up. We wanted to raise bonds because it makes for a better and more efficient way of raising capital. Today, all housing development bonds are raised from the Government as well as from the banks, including POSB. This is not the most efficient way because HDB's development projects are long term in nature and a better matching of our requirements versus our source of funds can be achieved by having a mixture of bonds and loans. Of course, we will try to raise the bonds at a period where the cost of funds will be most advantageous to us. This will depend on the rating of HDB by external agencies and also on the market conditions at the time that we raised bonds. So, we will try to do so at a time most advantageous to us.

Part of the purpose of raising the bonds is to provide the capital market in Singapore with breadth and depth. As you know, we are trying to develop Singapore as a debt centre and we are trying to provide more sources for both institutional and retail investors, a range of bond issues with different tenures and different risk ratings. To develop this market, we recognise that we should provide liquidity and ensure that the secondary market is liquid. And I am sure MAS will take up with CPF the issue of allowing CPF funds for investing in such bonds, including the HDB bonds.

Second, let me turn to the issue of acquisition. Perhaps I used too much shorthand in explaining how we are going to go through it. Let me explain in greater detail. When I use shorthand like SERS and all that, I thought it would be easy for most people to follow.

Let me explain the problem and how we are tackling it. As you know, in many of our old estates, we have flats on the void deck, on the ground floor. So when we do the upgrading, we are obligated to also upgrade the units on the ground floor. In some of these estates, the open space is very limited. So we find we cannot provide communal space for the units. In areas where we can provide communal space, there is no intention to acquire the ground floor flats in order to create the communal facilities. A good example will be Kim Keat - the first pilot project. There was plenty of space, so you can provide communal space in open space without having to disrupt the ground floor units. In the case of Mountbatten in Old Airport Road, we found the space to be very tight. There was not enough space for us to provide communal facilities. And the way we went about it was to persuade the ground floor units to give up the flats individually, everyone of them. Fortunately, we were able to persuade them and they all gave up their units and as a result, we were able to come out with a very good upgrading package which benefited everybody - the majority as well as the owners on the ground floor units.

So we are introducing this amendment to address such situations where the ground floor units are occupied, where the space is very tight and we have no choice but to acquire the units in order to provide communal space. Let me assure Members that there are enough checks and balances. The Minister is not an interested party in this exercise. In fact, the whole exercise is under the charge of the advisor who is the Chairman of the Working Committee which has to work out the upgrading package. The advisor has to sell to his residents, including the residents on the ground floor, that there is not enough space and therefore acquisition of the ground floor units is part of the package. The compensation goes to HDB budget for that precinct. So, there are checks and balances. The advisor cannot go round acquiring all the units he wants because he is going to bust his upgrading project. So, the Minister is not an interested party.

After the advisor has managed to sell his upgrading package to his residents, and they have taken a vote (75% say yes), they will send the plan to the Ministry and if we think that it is a sensible plan, the Minister would sanction the acquisition. And for the flats to be acquired, we are providing them the same SERS package. When I say SERS package, it means, firstly, the compensation is under the Land Acquisition Act with all its channels for appeal. It is done by an independent valuer on the date of 1st January 1995. We pay them an ex-gratia market supplement to bring the compensation value of 1st January 1995 to the present value, as at the date of the announcement. We offer the lessee whose flat is acquired a new flat in the vicinity with 20% discount in the new flat. If he cannot afford a new flat, we offer him a three-room buy-back flat. If he cannot afford a three-room buy-back flat, we offer him a rental flat. Under the SERS package, the compensation is extremely fair and we do not anticipate many problems from the people whose flats are acquired.

Let me summarise:

(1) this will be done extremely selectively;

(2) the compensation package is undertaken through the SERS model which is fairly well tried out and with enough avenues of appeal; and

(3) the advisor has to initiate and sanction the upgrading and make sure that this is for the benefit of the majority in his precinct. I can assure Members that there are enough safeguards and this will not be done except very, very selectively.

This whole issue about the criteria for exercising power or the social impact are all covered by the advisor in his Working Committee. He has to deal with the Residents Committee members and residents. In the Main Upgrading Programme, the process takes several iterations. It goes back and forth to the residents several times before they actually take a vote on the package. Let me assure Members that these powers will be used judiciously.

Just to add to the comments about the Bankruptcy Act. It is true that was covered when HDB flats were all bought by Singapore citizens. When we liberalised and allowed PRs to buy in 1989, we could have removed that protection then, rather than now. The standard sales and purchase agreement will be fair to both buyer and purchaser. It is the sales and purchase agreement that we are using today in all resale purchases. It is working well. We just want to provide the legislative basis to make sure that everybody uses the same document. We have had estate agents who provide supplements to the standard sales and purchase agreement and try to bypass the provisions. So, this is to prevent such abuses.

Mr Chiam See Tong: Other than Mountbatten, what other estates have flats on the ground floor?

Mr Lim Hng Kiang: When you walk around Redhill, Queensway and Queenstown, many of the flats were built before HDB undertook to build the satellite towns in a very comprehensive way. We provided flats on the ground floor. Maybe he should walk around, besides Potong Pasir, or his party should do so.

Mr Chiam See Tong: But these were all built in as part of the building. They were not in the original plan as void decks. Am I correct? They are already part of the structure of the building. You want to remove them to make into void decks. That is another matter altogether.

Mr Lim Hng Kiang: That is the whole point. When we built these old buildings, we maximised the space and we built flats even on the ground floor. Later on, as we went into Toa Payoh, we tried out this concept of void decks. After 30 years of experience, void decks do provide an added advantage to Singaporeans, not just in making the estate look more spacious, it provides space for communal facilities, etc. That is why void decks have become a standard feature in HDB flats.

When we upgrade the old estates, we could just upgrade all the units as they stand, without improving the estate's ambience by creating a new void deck. In some of these old estates, if there is space elsewhere to provide communal facilities, we can do so without disturbing the units on the ground floor, as we have done in Kim Keat and other areas. In some of these housing estates, it is very tight and if you want to provide communal facilities to your senior citizens or kindergartens, there is no space. One option is to remove the units on the ground floor and therefore create a void deck so that you get more spaciousness in your estate. This means you will have to compensate the people who are presently living on the ground floor. That is the whole purpose of the provision.

Mr Chiam See Tong: The HDB says it is to give better ambience to the residents there. But do the residents themselves demand for it? Are there complaints that there are no void deck in their block?

Mr Lim Hng Kiang: As I explained, that is entirely up to the advisor and his Working Committee. In the precinct, if the residents are happy and do not want to create new communal facilities, the Minister is the last person who will want to go and disturb them. It is entirely up to the advisor and his Working Committee. We are the last person to want to acquire the flats but if the majority of the residents feel that they want to upgrade and provide more communal facilities and, in so doing, they need to remove the units on the ground floor, we are prepared to offer them SERS compensation, which is very attractive. And I can assure you that the reason why we are able to persuade everyone of those in Mountbatten to give up their flats voluntarily is because the compensation is very attractive.

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.