HOUSING AND DEVELOPMENT BOARD FLATS (Administrative fee charged for loans)

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HOUSING AND DEVELOPMENT BOARD FLATS:

(Administrative fee charged for loans): 13.

Mr Steve Chia Kiah Hong asked the Minister for National Development (a) if the 0.1% administrative charge the Housing and Development Board (HDB) levies on its loans yielded a levy revenue of around S$64 million; (b) what is the breakdown of costs incurred in managing its mortgage loan accounts for HDB loans; (c) after deducting its cost, how much actual profit did HDB make from this 0.1% administrative fee.

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Mr Cedric Foo Chee Keng (for the Minister for National Development): Sir, HDB imposes an administrative fee of 0.1% to cover the costs it incurs in managing 500,000 mortgage loan accounts. This fee is lower than what banks normally charge to service and administer mortgage loans.

In FY03, the revenue collected by HDB from its mortgage loan administration was $64 million. The allocated costs incurred by HDB to service its mortgage loans were $29 million. These comprised mainly the costs of manpower, computer systems and office overheads.

Therefore, the surplus in HDB's mortgage financing activity for FY03 was $35 million, and this was used to defray HDB's losses in its other activities, particularly the home ownership activity. Over the past five years, HDB's overall deficit for the home ownership activity has averaged $530 million a year.

Mr Steve Chia Kiah Hong: Mr Speaker, Sir, there is a surplus of $35 million from this 0.1% administrative charge. That is actually a lot. It implies very much that the Ministry is actually charging more than the excess amount. Would the Ministry consider reducing it to 0.5% where you still have a good profit for that?

Mr Cedric Foo Chee Keng: Sir, 0.5% is an increase.

Mr Steve Chia Kiah Hong: 0.05%, Sir.

Mr Cedric Foo Chee Keng: Sir, the Ministry does not intend to reduce it because the right way to look at it is that loans do not exist solely for that purpose alone. It exists for the purchase of a house or a flat. So, if we consider the entire Home Ownership Scheme, the Ministry has been incurring, for the last five years, as I said, deficit to the tune of $530 million a year. So, there is really no

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need for us to adjust this loan administration fee of 0.1% at this point.

Additionally, lessees are not obliged to take a loan from HDB, although many of them do. HDB does so as a public service to help lessees own their homes. Lessees are, nonetheless, free to go to the banks for loans.