RESIDENTIAL PROPERTY (AMENDMENT) BILL

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RESIDENTIAL PROPERTY (AMENDMENT) BILL: Order for Second Reading read.

3.31 pm

The Senior Minister of State for Law (Assoc. Prof. Ho Peng Kee): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

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Key changes as announced in Minister for National Development's statement

This Bill seeks to amend the Residential Property Act (RPA) as announced in Parliament by the Minister for National Development on 19th July last year in his Statement on Policy Changes Affecting the Property Market. At that sitting, three key changes involving the RPA were announced:

(a) First, flats in buildings below six levels would no longer be restricted under the RPA; that means with effect from July last year, foreigners could buy such flats without the need to seek approval from the Minister for Law;

(b) Second, to level the playing field, all foreign companies became subject to Qualifying Certificate (QC) requirements if they intended to undertake residential property development. This measure also came into effect in July last year; and

(c) Third, it was announced that after the RPA is amended, the costs of the QC requirements be reduced as follows:

(i) the quantum of the Banker's Guarantee would be lowered from 50% to 10% of the land price; and

(ii) the developers would be given greater flexibility and be allowed up to six years to complete the development of the residential land.

Sir, we had a full debate in this House on these and other policy changes announced by the Minister for National Development.

Other amendments

Today, I will move amendments to the Residential Property Act to bring into operation the third key policy change mentioned earlier as well as other more

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technical amendments to improve the overall administration of the Act. I will now elaborate on these amendments.

_Refining the safeguards to prevent developers from speculating in land
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First, as part of safeguards to prevent developers from speculating in residential land, a foreign developer who currently applies for a Qualifying Certificate to develop residential land, ie, a QC holder has to furnish a Banker's Guarantee of 50% of the land price. If, for example, the QC holder breaches the condition prohibiting it from disposing of the land in a vacant or undeveloped state without the prior approval of the Controller of Residential Property, the Banker's Guarantee will be forfeited.

As I had mentioned earlier, we will be lowering the Banker's Guarantee amount to just 10% of the land price. This will reduce business costs for developers. To ensure that there is effective deterrence when the Banker's Guarantee quantum is lowered to 10%, we will be imposing a financial penalty on a QC holder found to be in breach of the condition that he is not to sell the land in a vacant or undeveloped state. The financial penalty imposed is capped at 50% of the land price and will take into account any Banker's Guarantee which has been forfeited.

Sir, as an additional measure, the Registrar of Titles will be empowered to enter a notice in the land register to alert persons dealing with the QC holder that the QC holder is prohibited from selling the residential land in a vacant or undeveloped state.

In short, we will be moving towards a more targeted approach where we lower the business cost for QC holders while ensuring sufficient measures to deter speculation in undeveloped land.

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_Streamline procedures for Singapore entities with clearance certificates
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Second, we have streamlined the procedure for a Singapore company when it applies for a clearance certificate from the Controller of Residential Property. Presently, a Singapore company applying for a clearance certificate is required to amend its memorandum or articles of association, and to submit a list of its members and directors containing particulars of their nationality. We have reviewed the requirements and are satisfied that it is sufficient for a Singapore company to submit a list of its members and directors containing particulars of their nationality. We will do away with the requirement to amend the memorandum or articles of association, thus reducing red tape and business costs without a loss of effectiveness. A consequential amendment will be made to section 34 of the Companies Act following the repeal and re-enactment of sections 10 and 14 of the RPA.

We will also streamline the procedure for Singapore entities, ie, companies, limited liability partnerships and societies, that have been issued with clearance certificates. Currently, in order to ensure that these Singapore entities remain eligible to acquire and retain residential properties, they are required to file annual statutory declarations, declaring the particulars of all their members, directors, partners or trustees, as the case may be. The proposed amendment will dispense with these annual filings. Instead, these Singapore entities will only be required to obtain the approval of the Controller (if they do not own any restricted residential property), or the Minister (if they own restricted residential property) before they cease to be Singapore entities.

To ensure that there is sufficient deterrence to achieve compliance after

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these changes, we will increase the ceiling for the fine from $5,000 to $50,000 for offenders who own restricted residential property but who fail to seek approval before they cease to be Singapore entities.

In other words, we will take the same targeted approach as the earlier amendment, ie, we lower business costs for those who comply with the requirements, but punish more severely the violators.

_Review penalty for holding property in trust for foreign persons
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Third, we have reviewed the penalty imposed for holding restricted residential property on trust for non-approved foreign persons. This is a serious breach. The current penalty, which is a fine not exceeding $5,000 and/or imprisonment for a term not exceeding three years, does not adequately reflect this. Hence, the Bill seeks to increase the maximum fine that can be imposed for such an offence to $50,000. In addition, the Court will be empowered to make a confiscation order in respect of benefits derived by any person convicted of an offence under this provision. The stiffer penalty will ensure that there is effective deterrence to prevent attempts to circumvent the law through an arrangement where a Singaporean buys restricted residential property on trust for a foreigner.

Sir, I beg to move.

Question proposed.

Dr Amy Khor Lean Suan (Hong Kah): Sir, the property market welcomes the amendments to the Residential Property Act, as it relaxes the restrictions on the foreign ownership of residential property, reduces business cost and imposes heavier penalties for offences committed under the Act. This relaxation is seen by industry stakeholders as complementing

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the Government's efforts to attract and anchor global talent in Singapore .

With the amendments, foreigners are now - for all intents and purposes - allowed to own all types of residential properties in Singapore , except landed homes for which approval is still required from the Controller of Residential Property. The previous restriction which prohibited foreigners from owning landed properties as well as apartments below six storeys, unless they have condominium status, was put in place some 30 years ago in the 1970s when the Residential Property Act first came into force. The policy intent was to safeguard certain categories of properties from excessive foreign ownership and prevent them from driving up their prices beyond the reach of Singaporeans.

But times have changed. Those earlier concerns which were the genesis of the original Act have subsided in importance against the backdrop of new economic realities. Our size and limited pool of labour impose limits to our growth. Most people therefore accept, perhaps grudgingly, that we need to supplement this local limited workforce with enough critical mass to draw a pool of self-sustaining high-tech and knowledge-intensive industries, to capitalise on our own niches, and to ensure our continued prosperity.

But the competition for global talent has intensified, and such talent is highly mobile. Urban sociological research has shown that the quality of life in general is an important draw for such talent. Hence, it is vital that talented foreigners wishing to set up home in Singapore be able to enjoy as many housing options as possible to suit their varied lifestyles and preferences.

From that perspective, Sir, I fully support this Bill. But I would like to raise three issues in relation to the Bill for the Minister's further consideration.

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First, lifting foreign ownership restriction for good-class bungalows. Sir, I had asked the Minister for Law in May 2005 if the Ministry would consider lifting restrictions that bar foreigners from purchasing landed residential properties in Singapore since such restrictions have already been lifted for Sentosa Cove.

Sir, the Minister had then noted that Sentosa Cove was given this special exemption as it is considered a unique world-class integrated waterfront development. He noted that it was the intention of the Government to create a niche for the international clientele wishing to buy these waterfront homes and help develop Sentosa Cove to its fullest potential as a world-class development.

Sir, I note the need to strike a balance between keeping landed properties affordable for Singaporeans and attracting foreign talent and investors to our shores to make Singapore truly an attractive global city for investors.

Based on feedback from the real estate industry, there is considerable interest in good class bungalows from foreigners looking to invest and live in Singapore . They wish to buy homes which are commensurate with their lifestyle and preferences back in their home country.

Hence, may I urge the Ministry to consider lifting the ownership restrictions for good class bungalows altogether, of which Sentosa Cove in reality is a subset. The argument that good class bungalows are very limited - there being only 39 good class bungalow areas with an estimated current total stock of some 2,500 units - and hence ought to be safeguarded for Singaporeans does not hold, since Sentosa Cove properties which are fully available to foreigners under some conditions would be equally limited. There is a need to regularise the policy.

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Second, new housing forms. Clause 4 of the Bill states that foreigners are allowed to purchase any residential property that is not a landed dwelling house. It is conceivable that new housing forms would be developed over time to meet the changing needs and aspirations of home purchasers. Recent new housing forms include strata bungalows and cluster housing, which essentially share common facilities such as swimming pools and tennis courts, and the owners of these properties own a share of the common property, much like condominiums.

Under the present Bill, it is not clear if foreigners can purchase such properties. Are they considered condominiums since their legal interest in the property is similar to condominiums or are they considered as landed properties for which there is restriction on foreign ownership?

Hence, I would like to ask the Ministry to periodically review new housing forms that may come up and clarify if they are subject to foreign ownership restrictions, if this is not evident. Additionally, the Ministry should also consider lifting foreign ownership restrictions on such properties, if there are no compelling reasons not to do so.

Third, harsher penalties. The Bill has increased 10-fold the penalties imposed for those caught trying to buy a landed home as a nominee of a foreigner from $5,000 and jail term of up to three years to $50,000 with a similar jail term of up to three years. Furthermore, the amendments will allow the Government to confiscate any financial benefits of or derived from the property. I would like to ask the Minister whether this implies that there are indeed a relatively sizable number of such offenders every year. On average, how many of such cases are there per year and has anyone been sent to jail for such an offence?

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I would also like to ask the Minister if the Ministry knows for what purpose these properties have been illegally bought on behalf of the foreigners. Are they subsequently occupied by the foreigner's family members or for the purpose of investment or trading?

Additionally, do these offences primarily relate to conventional terraces, semi-detached houses and bungalows, or do they also include good class bungalows?

Whilst I agree with the harsher penalties to deter those who try to circumvent the law, I would like to urge the Ministry to evaluate the reasons for such offences and determine if there is a need to review the policies and circumstances under which approval can be given for the purchase of a landed home by a foreigner.

Sir, I support the amendments made to the RPA as they clearly complement our current drive to develop Singapore into a city that will be exciting to the global talent and investors we seek to attract and retain. In line with this, Sir, I urge the Ministry to further consider relaxing the restrictions

on foreign ownership in respect of good class bungalows and also to regularly review the Act to take into account new housing forms that may emerge so as to make the Act relevant to the priorities and realities of the times.

With these comments, Sir, I support the Bill.

Assoc. Prof. Ho Peng Kee: Sir, I thank Mayor Amy Khor for her support of the Bill. She makes three points.

The first point concerns good class bungalows in Singapore. She argues for the lifting of restrictions on foreigners buying good class bungalows in Singapore and she premises her argument on what we have done in Sentosa Cove. But, Sir,

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we have explained before in this House and also publicly that Sentosa Cove is in a class of its own. In fact, she used the word "unique", and, indeed, it is unique because for Sentosa Cove, we have taken a liberal approach, since it is a unique integrated waterfront development with complementary recreational facilities located on an offshore island. And the purpose really is to attract a clientele, both local and, of course, foreigners, who desire the lifestyle that is found in other places in the world. So we have made that concession, based on these special premises which do not apply to land in Singapore, including good class bungalows. Good class bungalows may be bigger, more expensive or, indeed, more exclusive, but they are still part of the category of landed properties in Singapore. As Mayor Amy Khor knows, we have been very strict on that because we all know Singaporeans cherish landed property - they value land - and there is limited supply. So I think we should not cross that line. Let us keep the principle and keep the concession only to unique projects like Sentosa.

Indeed, there is ample housing on the Singapore mainland for foreigners, even the better endowed ones, to have a choice in Singapore mainland, including, of course, luxurious penthouses and other apartments of varying sizes in various districts. So, I think there is enough choice. Let us keep that balance. Because, as Dr Amy Khor has rightly mentioned, it is a matter of balance. Whilst we want to attract and root foreign talents here, we also have to take into account the fact that Singaporeans do also want an adequate supply of housing and, in particular, landed properties.

The other question she asked was new housing forms. When new housing forms emerge, we will consider whether or not to lift restrictions on them. But now, I think, the categorisations are quite

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clear. So all the other categories of housing which are in existence in Singapore have been clarified. Basically, we just lifted restrictions on flats below six storeys, ie, from 19th July 2005. For the other forms of housing, including strata titled landed housing in cluster developments, those remain restricted.

The third point is on whether there is a plethora of many cases concerning Singaporeans who stand as nominees and hold properties on trust for foreigners. There have not been many cases. So far, there have been only two reported cases. It is not because of the large number of cases out there that we are amending the law. But the current punishment of $5,000 is, indeed, very low. So we are raising the punishment to $50,000. And more importantly, we are also sending a stronger signal so that any ill-gotten gains, including a Singaporean who may be holding the property on trust for a foreign person, if the Public Prosecutor sees the need to do it and makes out a case, then, the Public Prosecutor can apply to the court to also have that property or the proceeds representing the property, should there be a sale, confiscated.

Sir, these are the points I want to make.

Dr Amy Khor Lean Suan: Sir, a point of clarification. I would like to note that while Sentosa Cove is a unique development, so are many other properties in Singapore itself, because really every property is unique, different, and heterogeneous, and so would be good class bungalows.

I would like to ask the Senior Minister of State, if it were so for Sentosa Cove, because it is termed unique as the Government sees it, and it is to attract international clientele, whether the Ministry would then consider relaxing the restrictions on other unique developments

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that may arise, ie, similar developments which offer unique lifestyle preferences, and so on, that would also attract international clientele.

Assoc. Prof. Ho Peng Kee: Of course, every property is unique in a general sense - the facing is different, the facade is different, the heights are different. I think Dr Amy Khor cannot stretch that term too far. But Sentosa is unique in the Singapore context. It is offshore; it is in a setting where there are waterfront bungalows; the lifestyle offered is unique. So, for that reason, we are prepared to lift the restrictions.

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. - [Assoc. Prof. Ho Peng Kee].

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