CAP ON LOAN TO PURCHASERS OF HDB FLATS

CAP ON LOAN TO PURCHASERS OF HDB FLATS

20.

Dr Amy Khor Lean Suan asked the Minister for National Development, with the implementation of credit assessment and a cap on the maximum loan that can be given to families earning less then $2,000 per month to purchase HDB flats, (a) are there households which are not eligible to purchase an HDB flat, whether direct from the HDB or from the resale market; (b) if there are, how many families who have applied to purchase such flats have become ineligible; and (c) will the HDB assist these families find affordable alternative accommodation for purchase or rent.

Mr Mah Bow Tan: A fundamental objective of the Government's public housing policy is to encourage home ownership. To do so, HDB flats are priced affordably and housing loan schemes are made available.

For low-income families, the Government assists them to own their homes through the Special Housing Assistance Programme. The schemes under this programme include the Low-Income Family Incentive Scheme, Sale of Flats to Sitting Tenants Scheme and the Rent and Purchase Scheme. Flat buyers under these schemes were previously exempted from credit assessment. They were granted mortgage loans of up to 100% of the flat purchase price. This had led to some households buying flats beyond their means and subsequently falling into arrears.

To encourage greater financial prudence, HDB has decided with effect from 1st October 2003 to extend credit assessment and to cap the mortgage loans for this group of flat buyers taking HDB concessionary loans. They will also be given financial counselling. These prudent measures will ensure that low-income families buy flats when they are financially ready, and not over-commit themselves.

The impact of the changes is expected to be minimal. Based on HDB's data on the 700 low-income households who bought flats under the various housing schemes in the first half of 2003, the large majority (94%) of them would still qualify for a HDB concessionary loan even with credit assessment. About 60% of the flat buyers would obtain the same loan quantum, while 34% of them would have to take a lower loan quantum. Only about 6% would not be eligible for a HDB loan.

HDB will assist low-income households who are not financially ready to buy a flat to find affordable alternative accommodation. They can rent a 1- or 2-room flat from HDB at highly subsidised rates under the Public Rental Scheme if their monthly household income does not exceed $1,500. Alternatively, they can rent a 3-room flat from HDB under the Rent and Purchase Scheme, and subsequently buy over the rental flat when their financial position improves.