HOUSING AND DEVELOPMENT (AMENDMENT) BILL

Order for Second Reading read.

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

In July this year, Government announced that the bank origination of HDB market rate loans would be implemented from 1st January next year, 2003. One of the objectives of this Bill is to facilitate the implementation of bank origination. The Bill also seeks to fine-tune the Act to facilitate HDB's implementation of its upgrading programmes.

Sir, before I explain the proposed amendments in greater detail, allow me to first reiterate the rationale for bank origination of market rate loans.

Bank Origination of HDB Market Rate Loans

HDB Concessionary and Market Rate Loans

HDB provides mortgage loans at a concessionary interest rate to help eligible Singaporeans buy HDB flats. These subsidised flats are granted to first-time subsidised flat buyers as well as second-time buyers who are upgrading from smaller flats.

HDB currently also provides loans at market rates. Such market rate loans are for HDB buyers who have either previously consumed HDB housing loan subsidies, or who do not qualify for HDB subsidies in the first place. There are five categories of such buyers: Singapore Permanent Residents; private property owners; high income households, ie, those which earn $8,000 or more a month; those who have already enjoyed two concessionary loans; and, finally, those who have enjoyed one concessionary loan for the purchase of a subsidised flat and are buying a similar-sized flat, or a smaller flat.

Bank Origination from 1st January 2003

As Members are aware, my Ministry is reviewing the functions of HDB to see in what way HDB can better fulfill its core responsibility, which is to provide good quality and affordable public housing. A guiding principle of the review is that HDB should, as far as possible, let the private sector take over those functions which extend beyond this core responsibility.

One such activity is the provision of market rate loans. As these loans are not subsidised and are pegged to commercial rates, there is no reason for HDB to continue to provide them. Our financial institutions have the resources and are well positioned to provide competitive mortgage financing for the purchase of public housing.

Hence, the Government decided that HDB will no longer provide market rate loans with effect from 1st January 2003. Flat buyers who are not eligible for HDB's concessionary rate loans can take market rate loans from the many banks which are licensed to offer housing loans. Existing HDB market rate mortgagors can transfer their remaining mortgages to the banks if they so wish.

Some Members have previously expressed concern that the provision of market rate loans by banks, instead of HDB, is in effect a withdrawal by Government of its social safety net. They see HDB as generally being more sympathetic towards flat owners in arrears, and will not repossess flats as a last resort. On the other hand, they perceive banks as being less forbearing, as they are profit-driven.

Let me reiterate that there is no change in the Government's commitment to the provision of basic housing in the form of subsidised HDB flats. We are not touching our basic housing safety net. Our housing subsidies have enabled the vast majority of Singaporeans to own their own homes. Concessionary loans are a key instrument to promote home ownership. Hence, the Government will continue to provide HDB loans at concessionary rates to eligible buyers. We will continue to maintain our home ownership policy by providing subsidised loans for subsidised flats so that eligible Singaporeans can continue to afford good quality public housing.

However, with bank origination of market rate loans, the Government is indeed pulling back the safety net at the fringes. But this will only apply to those who do not need extra help in the first place. They are either the financially better off, or those who already own a HDB flat.

Flexibility with responsibility

While flat-buyers will enjoy greater flexibility by obtaining loans from banks, this greater flexibility also comes with greater responsibility. Those who take loans from banks should exercise financial prudence, do financial planning, and buy a flat within their means. They must go into the purchases with their eyes wide open, and expect to be subject to the mortgage financing rules and foreclosure practices of the banks.

In tandem with the move to bank origination and greater responsibility, I had, in July this year, signalled my Ministry's intention to treat certain HDB flats bought with bank loans more like private properties. I informed this House that MND was actively studying whether and how the restrictions on resale and rental of HDB flats can be relaxed. This is also in line with the recommendations of various Economic Review Committee sub-committees, such as the CPF Working Group and the Sub-Committee on Entrepreneurship, that the Government explore various ways to help homeowners monetise their housing assets and thus free up capital in the economy.

I am pleased to announce the results of our review.

Current policy

HDB flats are restricted by a minimum occupation period (MOP), which is the minimum period that a lessee needs to own a flat before he can sell it. The MOP is currently five years for a flat bought at subsidised prices, ie, either directly from HDB or a flat from the resale market but bought with a CPF Housing Grant, and it is 21/2 years for a non-subsidised flat bought from the resale market without any CPF Housing Grant.

Subletting of the whole flat is also currently disallowed, except in special circumstances. For example, the lessee may be overseas, or he may be elderly and, subject to various criteria, he can sublet his whole flat for income generation.

These restrictions reinforce the principle of long-term owner occupation for subsidised public housing. They help to justify the subsidies enjoyed by HDB flat lessees and are fundamental features distinguishing HDB flats from private property.

Policy refinements

The Government has considered the proposals from the ERC carefully. It has decided that, together with the move to bank origination in January 2003, HDB will relax the current restrictions on MOP and subletting for resale flats that are bought without the CPF Housing Grant and which are financed by bank loans.

From 1st January 2003, HDB lessees who buy resale flats without any CPF Housing Grant and with bank loans will only need to occupy their flats for one year, instead of the current 21/2 years, before they can sell it in the open market. Existing resale flats bought without any CPF Housing Grant will also qualify if the lessee re-finances his outstanding HDB market rate loan with banks or fully redeems his HDB market rate loan. The reduction in MOP will also apply to existing resale flats that are bought without CPF Housing Grant and without any loan from HDB.

Subletting rules for these categories of flat buyers will also be relaxed. HDB will allow them to sublet their entire flat if they have occupied them for 10 years or more. With these changes, HDB resale flats bought without any CPF Housing Grant and without any loan from HDB will be treated more like private properties.

Subletting guidelines to prevent disamenities

Sir, let me stress that the Government is not abandoning the principle of long-term owner occupation, or the social objectives of public housing. That is why we have not completely relaxed the MOP and subletting rules. To preserve the good environment of our housing estate and to minimise nuisances that may arise from subletting, the HDB will apply certain guidelines and conditions on subletting that are already in place. Lessees are still expected to comply with the covenants in the lease and will be held responsible for infringements committed by their sub-tenants. The HDB will also work closely with the grassroots organisations and the residents to ensure that subletting does not become detrimental to the living environment of the HDB blocks. The HDB will be releasing more details soon on the relaxation of the MOP and subletting rules.

Amendments to the Act

Sir, let me now turn to the specific amendments to the Housing and Development Act - what they are and why they are being amended. Amendments related to bank origination

Bank loans for the purchase of HDB flats are secured on the value of the flats. Hence the bank has to be able to foreclose the loan, recover vacant possession of a HDB flat and conduct a mortgagee sale, should the flat owner default in his mortgage payments. Clause 6 of the Bill will allow this, by enabling the bank to attach the flat when it is exercising its power of sale under the terms of the mortgage charge. The bank, in place of HDB as mortgagee, will have first charge on the market rate loan should there be a foreclosure of the mortgage.

The Government recognises that bank origination is a significant move for HDB flat buyers. We are therefore keeping certain safeguards in place. The current protection clause in the Housing and Development Act against third-party creditors will not be changed. Flat lessees and their families, including those who take their mortgage loans from banks, will not lose their flats as a result of claims by third parties, in the event that they become bankrupt.

Clause 6 of the Bill also allows CPF Board to, as a last resort, exercise its power of sale to recover CPF monies used in the purchase of the flat when solicitors acting for the various parties fail to ensure proper refund of CPF monies when the flat is sold. This will help to safeguard the return of CPF savings to the CPF member's account for his retirement use.

Currently, HDB's consent is required before a mortgage by a bank can be made on a HDB flat. To facilitate the process of obtaining HDB's consent and to set out the terms and conditions for granting such consent, clause 9 of the Bill enables HDB to make rules for the creation of mortgage on HDB flats.

Upgrading works in HDB precincts

Let me now touch on the subject of upgrading works in HDB precincts. There is no change to our policies, but the amendments will ease the implementation of the upgrading programmes.

Sir, the Lift Upgrading Programme (LUP) that was introduced last year can be implemented as part of the Main Upgrading Programme (MUP). New lifts and lift shafts will be added, where it is technically feasible and cost-effective to do so, to give residents barrier-free access when their blocks are identified for the MUP. A 75% `yes' vote from the residents is required before MUP or LUP can proceed. Clause 11 of the Bill will make it clear that, although residents vote for both the MUP and the LUP at the same time, the LUP will only proceed, if both the MUP and LUP polls are successful.

The other amendments related to upgrading works will provide a clearer definition of the various terms used. For example, lift upgrading is today defined under the category of `special upgrading works' in the Housing and Development Act. Clause 10 will provide HDB with greater flexibility should we decide to expand the present scope of special upgrading works to other types of HDB properties. Clause 14 will give HDB the power of entry, including forcible entry, into HDB flats to carry out upgrading works within a flat or building that has successfully voted for upgrading. Such powers will, of course, be used very sparingly if at all.

Administrative measures

The Bill will also introduce some administrative changes to improve the enforcement of public housing regulations and policies.

Firstly, clause 2 of the Bill provides for the appropriate authority to approve the purchase, sale, lease and exchange of lands based on the land values. This is because the Government Instruction Manuals already provide for different approving authorities based on the value of the lands.

Secondly, clause 3 makes it clear that the rules on renovation of HDB flats apply to both the flat owners and the renovation contractor.

Thirdly, clause 4 of the Bill disallows HDB from delegating the power to make subsidiary legislation to any person. It also disallows HDB to delegate the power to delegate to another party.

Fourthly, clause 5 of the Bill spells out that all flat lessees, regardless of when they bought their flats from HDB, must seek HDB's prior consent before they are allowed to use their flats as a Technopreneur Home Office or for other commercial purposes.

Finally, clause 15 of the Bill increases the maximum penalty for refusing to give information or giving false information to HDB to a $2,000 fine or a 3-month imprisonment term or both. This is to enable HDB to effectively enforce against illegal parking along HDB service roads. Similar penalties are imposed under the Parking Places Act and the Urban Redevelopment Authority Act.

Sir, I beg to move.

Question proposed.

Dr Teo Ho Pin (Holland-Bukit Panjang): Mr Speaker, Sir, I rise in support of the Bill.

With the introduction of market pricing for HDB flats, it is only fair that HDB should reduce its restrictions on flat owners who do not enjoy much housing subsidy. The Bill will provide more flexibility for flat owners who are presently required to pay HDB market rates for mortgage loan to obtain loan from banks instead.

This move will benefit those who are able to secure attractive mortgage loans due to their financial credentials. But it may pose problems to those who are in financial hardship. These include Singaporeans who are bankrupt or face financial hardship due to the loss of their sole breadwinners or prolonged unemployment during recessions.

Over the last 10 years, many HDB flat owners have upgraded to bigger flats. Many dual income families had applied for larger flats and obtained subsidised housing loans from HDB. As a result of the recent financial crisis, some are presently facing difficulty paying their mortgages.

The proposed Bill will have negative impact on two groups of Singaporeans. Those who wish to downgrade to a smaller flat due to various reasons, such as financial hardship or retirement, or those who wish to move laterally to another flat of the same size due to reasons such as opting to stay near their family members. I wish to urge the Minister to consider providing HDB loan to these two groups of Singaporeans, in particular, those facing financial hardships.

With the lifting of rental restrictions, the supply of rental flats will increase, thus providing more options and cheaper accommodation for people seeking rental flats. But, to avoid any inconvenience to HDB residents, HDB should apply a cap on the number of persons living in various sizes of rental flats. This is to avoid HDB flats being rented out as workers' dormitory for foreign workers, thus affecting the residents.

In addition, we should also consider removing the two-and-a-half-year occupation period for flat owners taking a private bank loan. This will further increase the supply of rental flats, thus providing more options for rental.

Sir, the change in policy to allow private bank loans for certain households of HDB flats may cause confusion if the terms and conditions are not clearly disseminated to the public. Many existing HDB flat owners who may fall into this category may not be aware of the financial implications of taking up a bank loan which has first charge on their flats.

While we encourage financial prudence and self-management, many HDB flat owners may not understand the financial risks involved in taking up a bank loan. These include fluctuating interest rates, penalties for late payment, termination or early payment of entire loans, aggressive debt recovery procedures and charges, higher legal fees, and many other miscellaneous bank charges.

Sir, to protect the interest of HDB flat owners, HDB must launch a campaign to educate the public on the financial implications of bank loans, and provide financial counselling to potential HDB flat owners using bank loans. This will help Singaporeans to make better-informed decisions when purchasing HDB flats.

Sir, I wish to seek clarifications on certain technical points in the Bill.

Clause 2 of the Bill amends section 24(2) of the Housing and Development Board Act by deleting the word "Minister" and substituting it with the words "prescribed approving authority". Section 24 provides the power for HDB to purchase, sell and lease or exchange land. The amendment removes the need to seek the Minister's approval when selling, surrendering, leasing or exchanging land.

What is the rationale of removing this authority from the Minister or delegating this authority? The selling, surrendering, leasing or exchange of land has drastic impact on land use and the real estate market. The supply of land has always been a concern for both the Government and the private sector in Singapore. It is only prudent that such authority be given to the Minister instead of delegating it to a prescribed approving authority. I do not understand why the Board must seek the approval of the Minister when purchasing or leasing any land but do not need the Minister's approval when it sells, surrenders, leases or exchanges land.

Sir, clause 11 of the Bill amends section 65C of the Housing and Development Board Act with regard to special upgrading works. I hope the Minister can clarify what is classified as special upgrading works and under what circumstances must flat owners vote for such works. To date, only the provision of lifts at every landing is defined as special upgrading work, which requires voting and payment by residents. Interim upgrading works are usually 100% funded by the Government and residents need not pay at all.

If the scope of special upgrading works is not clearly defined, many items of works in the interim upgrading package may be included as special upgrading works, thus requiring payment by residents. This will pose undue financial burden on residents, especially those in 3- and 4-room flats.

Sir, I support the amendment in clause 5 to allow restricted use of HDB flats for commercial use. This will facilitate the Technopreneur Home Office scheme. To further encourage entrepreneurship, I would urge the Minister to expand the home office scheme for micro businesses, such as small agency or consultancy firms. This will provide more opportunities for business start-ups which will eventually contribute to our economy.

Sir, I support the Bill.

Mr Othman Haron Eusofe (Marine Parade): Mr Speaker, Sir, I rise to support the Housing and Development (Amendment) Bill and the various measures proposed by the Minister, particularly the schemes to help home-owners to monetise their housing assets and free up capital in the economy.

Sir, I would like to raise the following points so as to moderate the impact on house-owners who are facing financial hardships because of the current difficult business and economic conditions.

Sir, house-owners who have enjoyed one concessionary loan with a subsidised flat and are downgrading or moving laterally will now be required to take market loans. Could the Minister reconsider this especially for those households facing financial hardships? Like many others, I am concerned that they would find difficulties to secure a bank loan.

Sir, the proposal to allow house-owners who have bought "non-subsidised" flats without any subsidy as well as existing lessees of such "non-subsidised" flats to have the flexibility to sublet their whole flat is welcomed. Sir, I would like, however, to ask the Minister to allow house-owners of subsidised flats, especially those who have fully redeemed their HDB loans, to have a similar flexibility. Some may face financial hardship, especially those who are retrenched and cannot find employment. They are not able to sell their flats and downgrade in these difficult times. We should allow them this flexibility to monetise their housing assets. Others may not want to sell their flats for sentimental or other reasons. They want to move to smaller flats within their current means or stay with their children who can take care of them. I hope the Minister would consider such cases having due regard to their hardships which they may face in these difficult times.

Sir, on this note, I support the Bill.

Mr Zainul Abidin Rasheed (Aljunied): Mr Speaker, Sir, we all know that HDB is one of the key household words in Singapore. There would not be the scale of home-ownership as we now know and have here without the concept and philosophy behind the setting up of HDB.

It is an achievement which Singaporeans are all proud of. Successful as we are economically, the value of home-ownership, as a base for instilling a sense of belonging and as stakeholders in the newly emerging nation like our Singapore is priceless.

One of the reasons why HDB has been able to deliver on that score is that it understood the need for the Board to remain relevant, nimble and flexible in fulfilling its role. HDB knows goalposts related to housing keep changing as Singapore and Singaporeans move up the ladder of economic and social well-being. For, after all, housing in Singapore is more than just a question of brick and mortar. It is indeed a socio-political phenomenon. It is about living and, more importantly, living under one multi-cultural roof.

Judging from the number of amendments made by HDB since its inception, we are reassured that HDB wants to remain relevant, nimble and helpful. Whether for the better administration of the Act or to allow the Minister to make rules with respect to the terms and conditions of a sale, lease, mortgage or disposal of an HDB flat, or to allow an approved mortgage or statutory charge or to enable a poll to be conducted for lift upgrading and other special upgrading works, as the purpose behind this amendment Bill, to me, they all point to the intention of the HDB wanting to be helpful, and I support that.

I agree that upgrading has been and is generally on the radar screen for sometime now. Similarly, matters pertaining to leases, mortgages and the role of local banks are also very much in focus now. While I have no specific comments to make on those proposed amendments, except to call for a faster rate of lift upgrading, allow me, Mr Speaker, Sir, to urge the HDB to also look at the problem of those who want to downgrade.

I realise that the HDB has been very understanding in facing the problems of those who need help in terms of rescheduling mortgages or in settlement of other financial dues. The recent economic downturn and its subsequent retrenchments and rising unemployment have made many, especially in the lower income brackets, to realistically review their aspirations and dreams about the level and quality of home-ownership.

Many cases I met at the MPS, something I suspect must be true at other MPSs too, are seriously facing this problem of not being able to meet their obligations and do see downgrading as a way out. For those who had the hopes of making a profit from selling their flats have had to think again.

Many, I suspect, are caught in this trap. They want to downgrade but there are not many three-room flats available as the HDB has stopped building new ones. Neither could they sell their present four or five-room flats without making a loss. Moreover, they would also need to put up cash upfront for their new purchases, something they would be hard put at. I do not know how serious this problem is but I fear it might be faced by many Singaporeans.

Could the HDB, Sir, study this problem and see how best it could help the many home-owners who would like to or need to downgrade, but not capable of doing so either because of policy considerations or the market supply and demand situation? Could the HDB also review its existing policies that might make it difficult for those needing to do so? This should also be part of the HDB's endeavours to remain nimble and flexible in helping those in need.

Sir, I support the Bill.

Mdm Cynthia Phua (Aljunied): Mr Speaker, Sir, I rise to appeal to the Ministry of National Development, in view of the amendment Bill, to consider, in this time of slow economic recovery, when many Singaporeans are still facing difficulties in finding employment and many families are stretching on their savings, allowing for a second concessionary rate HDB loan for families who move laterally and downgrade their flats to a smaller flat due to forced circumstances, such as retrenchments, business failures, critical illnesses, death of breadwinners, divorce separations, imprisonment and family support. If these affected families are not able to enjoy this second concessionary loan rate from HDB, they will forever be in the financial web and stuck in this difficult financial position even if they downgrade.

In general, these people downgrade to lessen their financial difficulty. As stated earlier by Mr Mah Bow Tan on bank origination of HDB bank rate loans in Parliament on 23rd July, concessionary loans are a key instrument to promote home-ownership. In such dire circumstances, if these families are not able to get the concessionary rate loans, they would even lose their ability to own a flat. Since we cannot tell banks not to foreclose for hardship cases, we should encourage these families to take responsibility and be more dependent on themselves. We should applaud their decisive choice. This is in line with Government's encouragement of prudence and responsibility in housing purchase.

Secondly, most of the people in this group may be from the lower income. This would also cause another major problem as they may not qualify for the banks' strict income criteria assessment. So if they do not qualify, where can they turn to?

Mr Speaker, Sir, I would like to appeal to the Ministry to evaluate these special cases individually. The HDB would be able to set relevant criteria for the evaluation of the eligibility for this concessionary rate loan to ensure that when these families move laterally or downgrade, they are truly in financial difficulties and, in these circumstances, truly eligible for the subsidised loan.

One possibility to prevent abuse of the flexibility of consideration by HDB for this second concessionary loan is to cap the quantum for the second concessionary loan, possibly in relation to the previous outstanding loan amount of the previous flat. This action will definitely encourage the fundamental objective of responsible and prudent home-ownership amongst Singaporeans.

The second area of concern is that although the proposed amendments will enhance the home-ownership scheme to remain relevant and injecting greater flexibility into the public housing market, I would suggest that MND and HDB do consider certain guidelines to preserve the residential nature of the housing estates, especially so in a high density and close proximity of a block of flats. We should not turn the residential blocks into hostels, especially for foreign workers and foreign students.

MND and HDB must retain the final authority to cancel or reject subletting permission, especially so when nuisance and complaints are being made from neighbours. 4.15 pm

Mr Ang Mong Seng (Hong Kah): (In Mandarin): Mr Speaker, Sir, at present, about 86% of Singaporeans live in HDB flats. Among them, 96% have purchased their flats from HDB. Apparently, the Government's home ownership scheme has been well supported and is very successful. I think Singapore is the only country in the world where the housing needs of as much as 86% of the people are satisfied by public housing, with almost every family owning its own flat. This is a win-win situation for both the Government and the people.

However, as in any other schemes, any changes to the housing scheme or any amendment to the law would, directly or indirectly, affect some of the people.

On this amendment Bill, I would like to raise three points. First, on the change in granting of concessionary loan. Under the current rules, every qualified buyer is entitled to a concessionary loan offered by the HDB. However, under the amended rule, when an existing owner of a HDB flat wants to downgrade, eg, from a 5-room or 4-room flat to a 3-room flat, or from a 4-room flat to another 4-room flat, he will not be entitled to this concessionary loan. Of course, if they have the means, there is no problem. But for those who are facing financial difficulties, particularly in the past few years because of the economic recession, many people are retrenched or unemployed, and are unable to find jobs for a long period of time, they will have problem servicing their loan, and may have to resort to downgrading in order to make ends meet. Under the new rule, they will not be able to enjoy this concessionary loan from the HDB. I think this is something that we should carefully reconsider. Residents who have to downgrade from a bigger flat to a smaller flat owing to financial hardship will face double trouble if they are deprived of the entitlement to a concessionary loan rate.

Another group that warrants special consideration is the senior citizens. In their younger days, they could have purchased a big flat so that they could live with their children and grandchildren. Now that the children have grown up, bought their own flats, and set up their own families, the old folks may find the flat too big for just the old couple who are left alone, all by themselves. They do not need to stay in such a big flat, and the logical thing is to downgrade to a smaller flat. But now, they are not entitled to the concessionary loan. In the circumstances, can we not review the applications on a case-by-case basis? If they were in financial difficulties, particularly those who were retrenched, or maybe those who were adjudicated bankrupt or had some special financial difficulties, can we not consider their cases on a case-by-case basis? As for the senior citizens, do we have enough studio apartments for the elderly? I think this is one area where the HDB needs to look into.

Secondly, minimum occupancy period of resale flats. Under the present rules, you have to stay in the flat for more than 21/2 years before you can put it up for resale in the open market. With the present amendment, this minimum occupancy period is shortened to one year. The point is, since they have bought the flat from the open market with no subsidy from the Government, why should there be such a restriction? Can we not fully liberalise this rule and do away with this restriction, so that when they apply to the bank for a loan, they will be in a better position to bargain for better terms?

Thirdly, subletting of flats. Those who bought the resale flats from the open market are allowed to sublet the flat after staying there for a certain period of time. I would like to ask the Minister how many units would qualify for this scheme under the present arrangement. Of course, the permission for subletting is a good policy. It will provide the prospective tenants with cheaper rental flats and, at the same time, allow the owners to earn some extra income. However, if there were too many of these units available for subletting, it would give rise to some problems.

Just now, the Minister mentioned that such subletting would be subjected to strict rules. We would like to know whether there would be enough provisions in the rules to restrict the owners from subletting to an excessive number of foreign workers to the annoyance of their neighbours, or people who use the flats for illegal activities. This is something which we have to be very careful about. Each and every application for subletting should be carefully scrutinised before it is approved.

Sir, I support the Bill.

Dr Tan Boon Wan (Ang Mo Kio): Sir, thank you for allowing me to join in this debate.

Several of my hon. colleagues of the House have spoken at length on the Bill. Let me add my support of the Bill for giving the HDB the flexibility to allow a wider use of HDB flats. This is timely as the nation emphasises the importance of creativity and innovativeness, the promotion of entrepreneurship and the encouragement of starting of new business. But in allowing the wider use of HDB flats beyond residential purposes, let us be mindful of the needs of neighbours and other residents. The Bill - ultimately, the Act - provides for the termination of the lease for non-authorised use. But what about lessees who use the flats for the intended purposes but are indifferent to the needs of residents and neighbours? Their activities may cause annoyance. But instead of doing something to reduce the annoyance, they hide behind the authority granted to them to use the flats. I hope that in granting them the right to the flat, the lessees are also made to undertake the responsibility not to disturb the neighbours. If they unreasonably choose to ignore the problems they cause to the neighbours and neighbourhood, the Board must have the right to withdraw the privileges granted to them.

On that note, Sir, I support the Bill.

Mr Low Thia Khiang: Sir, I rise to oppose the amendment. This amendment requires HDB flat buyers, who have used up their subsidised loan quota or who are not qualified for subsidies, to take market rate mortgage loan from banks rather than the HDB.

Clause 6 of the Bill provides for banks to grant mortgage, and they would be able to take HDB flats from registered lessees and sell them to pay outstanding loans. The implication of this amendment is that HDB flats can now be seized and sold by bank mortgagees for default of mortgage loans. Although the reason for this change, as explained, is that lending money to flat buyers at market rate is not HDB's core business, my question is whether this entire move of making flat owners take loans from the banks is politically motivated. We all know how devastating it can be to evict families from the only roof they have over their heads. HDB, being a statutory board, is identified as a wing of the Government. If it has to evict families who have not kept up with their payments, it will show how uncaring and uncompassionate the Government is.

In this current economic climate and uncertainty in the future employment market, we can expect that there will be retrenchments, unemployment and decreased business opportunities. More families will be unable to keep up with their loan payments. By shifting lending from the HDB to the banks, the banks will be the ones doing the eviction. In this way, the Government will not be seen as the bad guy, when, in reality, the Government is distancing itself from Singaporeans who are facing tougher times ahead. This, in Mandarin, is called chea tau sha len.

Sir, I also wish to seek clarification on clause 2 of the Bill. Instead of the Minister, a "prescribed approving authority" will decide whether HDB land will be sold, exchanged, surrendered or leased. The Explanatory Statement says that the approving authority will be prescribed in the Rules. I wonder who is this powerful authority going to be; will it be more than one authority; and what is the reason for the change.

Mr Mah Bow Tan: Sir, I would like to thank various Members for speaking in support of the Bill, and I will respond to Mr Low Thia Khiang later.

First of all, Dr Teo Ho Pin has asked whether we can help those who either downgrade or move laterally and who are in financial difficulties because he believes that in this current situation, they may find it more difficult to get a bank loan instead of a loan from HDB. Several other Members have also spoken along the same lines - Mr Othman Haron Eusofe, Mdm Cynthia Phua, Mr Zainul Abidin and also Mr Ang Mong Seng.

Let me, first of all, explain - I think it was Mr Ang Mong Seng who said that this is a new policy - that this is not a new policy. This is an existing policy, and what this amendment Bill seeks to do is to require such lessees, instead of getting a market rate loan from HDB, to now get it from the bank. This is just for clarification.

But back to the reason why we have not allowed these people who want to either downgrade or to move laterally from taking a concessionary loan and instead to take a market rate loan. First of all, let me, as I said in my Second Reading speech, repeat once again that the Government is committed to ensuring that public housing in Singapore remains affordable to its citizens. As the public housing authority, HDB's role is to ensure that all Singaporeans will be able to afford at least the first HDB flat. This is the reason why HDB sells new flats at subsidised prices and also with subsidised loans at concessionary interest rates, and HDB will continue to do so. If they do not wish to buy a subsidised new flat, they can also buy a resale flat and we give them a CPF housing grant.

For the first loan, HDB will provide a subsidised interest rate for first-timers. In addition to that, to encourage social mobility, to encourage people to move up, to allow those who have outgrown their flats - they may have bought a 3-room flat many years ago; their families have grown up; they want to have more rooms for their children - or they just simply want to have a bigger flat, HDB provides a second concessionary loan to those who have already bought their first subsidised flat. So, from the perspective of the need for housing, the need to have a roof over their heads, there is really no strong reason for an HDB flat owner to move laterally; in other words, move from one flat to another flat of the same size, or for him to downgrade. And those who decide to do so should consider carefully when they do so. They should act prudently and they should decide whether they have sufficient funds. Indeed they would have sufficient funds in most cases arising from the sale of the existing flat. Invariably, most of them who sell their first flat, which is a subsidised flat, would be able to enjoy quite a significant capital gain. They can then use this capital gain to finance the purchase of the second flat, which is either of the same size or smaller. But having said all these, we do know that there are people who downgrade because of financial difficulties, and these are the cases which, I think, Members in this House come across during their meet-the-people sessions. These are the cases which Members who have spoken just now are referring to - people who have difficulties in servicing their mortgage either because of retrenchment, prolonged illness, demise of their main breadwinner, and so on and so forth. Therefore, because of this, they have no choice but to downgrade.

So we recognise that there are such cases which downgrade due to financial difficulties and I would like to assure Members of the House that HDB will consider such cases sympathetically as and when they come to the attention of the HDB.

Dr Teo also mentioned the cases of those who either move laterally or downgrade in order to stay near their parents. I believe he asked whether such cases can also be allowed to enjoy the second concessionary loan. Let me inform him that there are actually quite a few schemes in place to encourage people to move nearer to their families. There are higher CPF housing grants for resale flats, for those who wish to move nearer to their families. There is a married children priority scheme for purchase of new flats in the mature estates. And all these schemes have been fairly successful. The number of families living nearby or in the same estate has actually gone up. So, I do not think there is any special need for another scheme to promote family living. But, nevertheless, we will keep in mind his suggestion for another day.

Dr Teo also proposed some restrictions on rental flats. If somebody wishes to sublet his flat, he is concerned that, without any restriction, this may be abused. It can either be let to foreign workers or to those who are not so socially responsible and so on. I believe several other Members have also made the same point.

Let me assure them that this is a concern of the HDB and, in fact, this is the reason why even today, HDB allows subletting of the whole flat under special circumstances. There is already in place a set of guidelines to govern such subletting. In other words, you cannot just freely sublet to any Tom, Dick or Harry. You have to abide by such guidelines and these guidelines and conditions for subletting will also be applied when we relax the subletting of HDB flats. In the first place, they will have to seek prior approval from HDB before they sublet. Lessees will be held responsible for any infringement that their sub-tenants commit. And if there are such infringements, then, obviously, the HDB will be able to take action. HDB, for this particular purpose, will also conduct half-yearly flat inspections for approved subletting cases. This is to make sure that the situation that Dr Teo talked about does not actually arise in our HDB estates, where you have got 20 foreign workers living in one HDB flat, and so on. So there will be guidelines. There will be regular inspections to make sure that infringements do not take place. As a final safeguard, what HDB will do is to have regular dialogues with the grassroots leaders, advisers and Members of Parliament to get feedback to see whether the scheme is working well, to see whether there are indeed disruptions to the social environment, disamenities, people who are anti-social, and so on and so forth.

But I do not think we should jump to conclusion that people who sublet HDB flats will automatically be anti-social. That is probably not being fair to those who may wish to sublet the flats. Let me just say that the subletting will actually allow quite a large number of people who may not want to buy HDB flats - the young couples, people who are in financial difficulties, who may not wish to commit - to also sublet such flats. So, I do not think we should straightaway jump to conclusion that it is only foreign workers who are subletting the flats.

Dr Teo also commented on the possibility of lessees not understanding clearly the financial implications of banks taking the first charge, if they refinance the loans. I think this is a legitimate concern. But, having said that, I think we should also advise those who wish to refinance their existing loans with banks, all those who are going to go to the banks for a loan in the first place, to be aware and careful, to be financially prudent, and to do their sums before they jump in. Indeed, I dare say that the banks themselves, before they lend, would also have to do their homework, do due diligence work, and make sure that the people that they are lending to are creditworthy. On both counts, both parties, the lender as well as the borrower, will have to do their homework. And, I believe, this is currently being done when you go to a bank to borrow for purchase of a private property. They are not just going to lend it to you without asking any questions. Similarly, I expect that the banks will exercise similar prudence, credit assessments and judgement when they lend to HDB flat owners. HDB flat owners will also have to do their sums. So I would be loath to get HDB to do the financial counselling. It is not HDB's job to do financial counselling for those who are going to the banks. If HDB were to do so, one could argue why are we having bank origination in the first place. Because the whole idea of bank origination is for HDB not to be in the business of providing market rate loans. It is not their job.

There are three minor points that Dr Teo raised. One is on clause 2 of the Bill - I think this is also what Mr Low Thia Khiang asked - why is it that we are changing the Act. Mr Low detects some monkey business somewhere, and this is the reason why he raised it. But I would like to disabuse him. There is no conspiracy here. It is quite a simple matter. What happened is that the Government Instruction Manual has changed whereby there are new authority limits. In the revised Government Instruction Manual, land sales below $10 million will no longer need ministerial approval. It goes to a Tenders Board. So the approving authority, in this case, for land sales below $10 million will be the Tenders Board. This Tenders Board will comprise the senior officials in the Ministry of Finance and the relevant Ministries, whichever Ministry is responsible for that sale. Land sales above $10 million will now go to a Ministerial Committee, and this Ministerial Committee will consist of Ministers from the Finance Ministry, the National Development Ministry and the relevant Ministry where that sale is taking place. So, basically, this is an administrative change in the Act which recognises the changes in the Government Instruction Manual.

Clause 11 - what is "Special Upgrading Works"? This is what Dr Teo asked. Special upgrading works currently refer to the Lift Upgrading Programme. This is what we have at the moment. When we carry out the Lift Upgrading Programme, we do so under the Housing and Development Act. We carry out a poll for Lift Upgrading Programme under the Housing and Development Act, and we call this Special Upgrading Works. But, in future, we may expand the scope of Special Upgrading Works to include things like, for example, a pneumatic refuse collection system, if we do decide to implement that. There have been trials going on. If we wanted to do that, we could include that for the upgrading precinct but classify it as Special Upgrading Works. I just use this as an example. I am not suggesting that we are going to do this. But if we do decide to, we will obviously have to have further discussion on this.

The last point that Dr Teo mentioned was on the Technopreneur Home Office Scheme. He asked whether we can expand this to other small businesses. Let me just say that at the moment, we are already allowing some businesses to be conducted within the HDB flat, businesses which do not pose any nuisance. Examples that come to mind include giving tuition, people who work from home, people who do small scale work, say, sewing, tailoring, that kind of business. But we are actually looking at broadening the scope of this to see whether we can, in support of the drive to encourage entrepreneurship, allow some other businesses to be allowed in HDB flats, provided that they do not create nuisance to their neighbours and they do not create disamenities in the general surroundings. But this is under discussion with the various relevant Ministries. So far, we have not come to any conclusion yet. But, yes, such discussions are ongoing.

I believe I have answered Dr Teo's points.

Mr Othman Haron Eusofe touched on two points. One was on financial hardship which, I believe, I have answered. He also asked about subletting, extending to those who are in subsidised flats. The general principle really is, in this particular case, that for those who are not getting any subsidy from the Government, whether in the price of the flats or in the loan, we are prepared to extend this concession to them. However, in the case of subsidised flats, I think there is a huge subsidy element involved. At this point in time, I do not think we should be extending such a concession to them.

Encik Zainul talked about helping the downgraders. I think I have also addressed that point.

Mdm Cynthia Phua talked about second concession loan for downgraders. I have also addressed that. She also asked about preserving the residential nature of housing estates. I believe I have also addressed that point.

Mr Ang Mong Seng asked why not just lift the MOP (minimum occupation period) completely. Why reduce it from two-and-a-half years to one year? The reason is very simple. The MOP for HDB flats is to ensure that public housing is meant for owner-occupation. It is not for speculation. It is not for investment. So the owner-occupation principle is very important. When you buy a HDB flat, you must live in it. It is not for buying and then renting out. That is the reason why we want to keep a MOP but we wanted to reduce it in order to create greater flexibility. When we relax the rules, when I said we want to treat HDB flats like private properties, I did not mean totally, completely like private properties. There is still a certain principle involved in public housing and that principle is owner occupation, which we would like to preserve.

Secondly, we also want to keep the MOP of one year because, although it is a short period, it helps us to signal that HDB flats are not bought for speculation or for investment. And when the property market turns up, when trading of HDB flats comes back again, which was quite prevalent at one stage, we want to make sure that the minimum occupation period is in place to prevent such speculation.

Mr Ang Mong Seng asked how many units are allowed to be sublet and will it disrupt the rental market. I think that is the thrust of his question. Based on HDB's statistics, for those who are either totally non-subsidised or those who can actually re-finance, there is something like 15,000 HDB flats which are eligible for subletting with the 10-year rule. Having said that, I think not all of them will be subletting their flats straightaway. In the first place, they would have to find another place to live. And, secondly, I do not think that HDB lessees would just want to sublet their flats without careful consideration. So although the maximum number is 15,000, I dare say that the final number that will actually be released out into the rental market will be far less than that. So I do not see that there will be a major impact on the rental market.

Finally, I would like to respond to Mr Low Thia Khiang. His point is that this whole move is politically motivated that, as a result of this, Government will now wash its hands off market rate loans, so that we do not have to evict tenants who foreclose. Let me inform Mr Low that the number of evictions from HDB flats of tenants who do not pay up their loans, or who default on their loans, is extremely small. So that has never been the motivation for this move. It is not as if there are many HDB tenants who are defaulting on their loans and HDB is now deciding to throw this problem on to the banks. That has never been the intention, I assure Members of this House. HDB's role is to make sure that there is sufficient housing for our people. It is affordable, good quality housing and we want our people to stay in the flats.

What is the motivation then, if it is not political? It is very simple. We are in the process of reviewing the role of HDB. We know what HDB should do. We want HDB to concentrate on public housing. We want HDB to concentrate on building good public housing. We want HDB to concentrate on managing, on making sure that towns are properly built, and so on. HDB is not a bank. It is not a financial institution. There are many financial institutions, over 100 at the last count, who are better placed to provide market rate loans. These are market rate loans. These are not concessionary rate loans.

So for market rate loans which are provided at market rates, let us leave it to the banks. HDB should concentrate on doing what it does best - building good quality, affordable public housing. That is the motivation for this move. It has got nothing to do with what Mr Low mentioned just now.

On clause 2, I think I have already explained to him what the changes are about.

Mr Speaker, Sir, I believe I have answered all the questions.

Mr Low Thia Khiang: Mr Speaker, Sir, may I seek clarification from the Minister? Sir, I understand that, currently, if the lessee of a HDB flat is evicted by HDB due to financial difficulty, that is, unable to pay the loan, normally on compassionate ground, HDB will offer such a lessee a rental flat. I would like to ask the Minister, with the change, when the bank evicts the lessee of a HDB flat, will HDB come in and help? Otherwise, where are they going to live?

Mr Mah Bow Tan: Sir, in the first place, when somebody buys a property to live in - and I am talking again, and I remind the House, that this is not the first basic flat, we are talking about the second or even the third flat - when he decides to purchase that second, third, or whatever flat, he has to do so with his eyes wide open, knowing exactly what he is doing, whether he can afford the purchase price, whether he can afford the downpayment, whether he can afford the repayment, the instalment payment, and so on. So I do not expect the Government to stand guarantor to every person who buys a flat using bank loans and say that if you default, if you cannot afford to pay your instalments, do not worry, we will give you a rental flat. There is no blanket guarantee.

Of course, as in all cases which come to HDB, when MPs put up appeals on behalf of their constituents, when there is a genuine case of hardship, if the family has really fallen on hard times, and we look at it, we find that there is a case for special consideration, we will provide special consideration. And that is the rule of thumb. But to expect HDB to have a blanket ruling and say, "Don't worry, we are going to provide you with a rental flat if you default on your loan", I do not think that is a wise thing to do. And it creates a moral hazard. That is not something that we would like to see. What we want to do is to explain to our people, when you make a commitment like this for public housing, or for private housing, when you go to a bank for a loan, please make sure you know what you are doing and do your sums.

Mr Chiam See Tong (Potong Pasir): Sir, the Minister says the number of eviction of lessees due to default of payments is very small. Can he please tell us how many of such evictions were there in 2001 and up to the 10th month of this year?

Mr Mah Bow Tan: Sir, I do not have the exact numbers with me. But I can recall that there were less than 10.

Mr Low Thia Khiang: Clarification, Sir. I understand one of the reasons why there was not much of default is because there were some Government schemes in place, like deferred loan, etc. Will the Minister expect, in the event of an economic downturn like this, the banks would, like the Government, provide such services to help people who are unable to service their loans to tide over the period? And what would the Government advise the banks?

Mr Mah Bow Tan: Sir, as I said in my Second Reading speech, when somebody goes to the bank for a loan, he would have to abide by the bank's rules of foreclosure, he would have to abide by the bank's rules on credit assessment. So, the short answer to him is that all borrowers would have to abide by the rules that are laid down by the lender. And it is no different for HDB's case, it is no different for the bank's case. In the case of HDB, when they come to HDB to borrow, HDB has to do a credit assessment. If they do not comply with those conditions, and they default on their loans, HDB can evict. But, as Mr Low rightly pointed out, HDB is more forbearing, more forgiving. HDB has various schemes in place to help borrowers, such as stretching of repayments, and so on. We do not expect the banks to do so. Neither should we.

When they go to the bank for a loan, they have got to do their sums. And when they go to the banks currently, they may find that the banks may actually be more flexible than HDB. They may find that the banks may offer them a lower interest rate than HDB. They may find that the banks are willing to give them a longer period of loan. I understand that some banks will allow 30 years or more. HDB has a maximum, which is less than that. All this will have to be factored by the borrower. Do you want to go to the bank to borrow or not? Do you want to buy that flat in the first place or not? These are decisions which individuals would have to make. We are not talking about facilitating the purchase of the first flat. This is what I explained right from the outset.

The first timers who want to purchase their first flat go to HDB, and it will provide them the subsidised loan, provide them with a subsidised flat and they will have their first flat. But, now, they are looking for the second, or third flat, or they are PRs, private property owners, or high income earners. These are the people who need to get a market rate loan. These are the ones who have to go to the bank. Is Mr Low saying that these people would also need to have a guarantee that the Government will help them if they default on their bank loans? Surely not. So we are really talking about those people who do not need a concessionary loan, who already are required to get a market rate loan from HDB. These are the ones who will have to go to the bank to get a loan. And these are the people who should be in a good position to judge whether they would like to get a loan at that price or not. In other words, you have to make your decision based on your own situation. You have to do your sums before you get the loan. We are not talking about those who are buying HDB flats for the first time. For those people, nothing has changed.

Mr Othman Haron Eusofe: I just want to make a clarification. In fact, I am asking for consideration to be given to people who have bought subsidised flats to rent out the whole flat, and I am really referring to the hardship cases. They have bought the subsidised flats and they have stayed there for many years. Sometimes, they want to sell it, but the market conditions do not allow them to sell. So why do you not consider allowing them to monetise the flat by renting it out for a while and get an income? In the meantime, they can stay with their children, or downgrade and rent a smaller flat. So I am just asking that the Minister consider the appeals on a case-by-case basis.

Mr Mah Bow Tan: Mr Speaker, Sir, there are already certain schemes in place for the cases that Mr Othman mentioned earlier. In other words, if you are staying in a subsidised flat and you have financial difficulties, we already have various schemes in place, ranging from deferment of your instalment payments, reduced repayment schemes, and so on and so forth. Quite a few of those who are in financial difficulties and come to HDB for financial assistance have been put on these schemes. So far, I believe these have been well received. So, I do not think there is a need for us to expand this scheme for subletting.

Mr Steve Chia Kiah Hong (Non-Constituency Member): Mr Speaker, Sir, can the Minister clarify and explain how the individual third-time flat buyer can factor in factors like economic recession, retrenchments and sudden job loss in the planning process? In his negotiations to buy a property and take a loan from the bank, he cannot factor in all these factors of retrenchments and job loss.

Mr Mah Bow Tan: Mr Speaker, Sir, I thought this is what happens all the time. This is what we all do. We make our decisions based on what we believe is the right thing to do. Surely, the hon. Member does not expect the Government to tell him what he should do, whether he should buy a flat or not, what is going to happen to the economy. All of us have to make up our own minds. This is what responsibility is all about, surely.

Mr Low Thia Khiang: Sir, I wish to clarify. I am talking about people who need to downgrade because of financial problems, not talking about people with private properties. The other question is: is the Minister advising Singaporeans that they should not buy more than one flat, because they would have to take a bank loan, they may be in trouble? Is that what he is talking about?

Mr Mah Bow Tan: I do not think I said anything of that sort. Basically, what I am saying is that if you buy your second or third HDB flat, and you cannot get a market rate loan from HDB, you go to the bank. And when you go to the bank, the bank will ask you questions, you will have to answer those questions. Then you have to decide whether you should proceed or not. Can you afford it or not? And if the answer is yes, you can afford it, go ahead. If the answer is no, you do not think you can afford it, you are worried about the future, you are worried about your job, you are not sure, just keep in view.

It is a bit strange, because here we are talking in this House, and Members have said so, that we should give Singaporeans more responsibility, we should not be a nanny state, we should allow them to make up their own minds. A simple thing like this where you have to decide whether you should buy a flat and how much you should pay, these are things which every responsible person should be able to decide and make up his mind for himself. Do you expect the Government to decide for them?

Mr Low Thia Khiang: Clarification, Sir. Does the Minister agree that, in fact, by imposing a different risk between HDB and bank loans at market rates, when going to the bank, the person is likely to lose the whole flat as well, that there is a risk factor? The Government is actually helping Singaporeans to decide that they better not buy a second or a third flat by taking a loan from the bank.

Mr Mah Bow Tan: The hon. Member talks about risks. I thought we were saying that we should let people take some risks. Allow them to take some risks but give them the responsibility. However, at the same time, give them some more flexibility, some more freedom. This is exactly what we are doing. Of course, there is risk. In every decision, there is a risk involved. In this particular case, there is a risk too. But if you do not want to take the risk, then what happens?

Ms Braema Mathiaparanam (Nominated Member) rose.

Mr Speaker: Do you have a different line of questioning?

Ms Braema Mathiaparanam: No, it is clarification.

Mr Speaker: Yes.

Ms Braema Mathiaparanam: Sir, for a third-time applicant, in terms of joint applications where couples are concerned - a different type of risk - the marriage goes bust, will there be any kind of consideration here, please?

Mr Mah Bow Tan: I did not realise that marriage is a risk! But I am not an expert on that, so I better keep quiet. What was your question?

Ms Braema Mathiaparanam: When a marriage dissolves and, instead of a joint application, they now become two single applicants, and they could have upgraded, so it becomes a third-time application, but it is a single parent. Could there be any concessions, please, or does it go back to the same premise of the bank loan?

Mr Mah Bow Tan: Generally, as a rule, the answer is that they would be considered as third-timers. But, the HDB has so many rules and regulations, you always tend to have somebody who runs afoul of those rules in some way or other. We always consider all cases very carefully. And if there is a good case made out, then special consideration can be given, but not as a general rule.

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 Mah Bow Tan].

Bill considered in Committee.

[Mr Speaker in the Chair]

Clauses 1 to 12 inclusive ordered to stand part of the Bill.

Clause 13 -

The Chairman: The hon. Member for Ang Mo Kio GRC has given notice of an amendment to this clause. The notice of amendment has been circulated to hon. Members.

As inadequate notice has been given of this amendment, it is subject to the consent of the Chair and the general assent of Members present. I give my consent. Is it the pleasure of hon. Members that the amendment be moved?

Hon. Members indicated assent.

Dr Tan Boon Wan: Sir, I beg to move,

On page 5, line 29, to delete the word "change" and insert "charge".

The words which were originally proposed to be added, "change or other encumbrance", follow immediately the term "subsisting mortgage". When all three terms are taken together, "subsisting mortgage", "change or other encumbrance", the word "change" seems to be out of character from the other two terms which are legal in nature. I think there is a typographical error, in that instead of the word "change", it should be "charge". All three terms share a common legal character. I believe that this is the intent of the Bill.

Mr Mah Bow Tan: Sir, I thank the hon. Member for his amendment. He has got very sharp eyes. It is correct. It is a typographical error and the word should be "charge" instead of "change".

Clause 13, as amended, ordered to stand part of the Bill.

Clauses 14 and 15 ordered to stand part of the Bill.

Bill reported with an amendment; read a Third time and passed.