HEAD T - MINISTRY OF NATIONAL DEVELOPMENT

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** Head T - Ministry of National Development **

The Chairman: Head T - Ministry of National Development. Dr Amy Khor.

Housing Policy

Dr Amy Khor Lean Suan (Hong Kah): Sir, I beg to move,

That the total sum to be allocated for Head T of the Estimates be reduced by $100.

Sir, in defining HDB's role, the Minister had noted at last year's COS that, going forward, the Board must continue to plan and execute our home

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ownership policies such that the HDB experience to the Singaporeans is a memorable and rewarding one. Among other things, this implies that HDB flats must remain affordable and that public housing policies are fairly crafted and implemented. These are compelling motivations in the next phase of Singapore's housing policy.

For HDB to meet these objectives, it ought to undertake a comprehensive review of its rules and policies with the aim of rationalising and simplifying them so as to make them more easily understood by the average HDB flat buyer and dweller. It should also reduce any unwarranted rigidity in the system that makes it more difficult than it should for flat owners to deal with their properties in congruence with their life cycle needs, changing economic status over time, and their social aspirations or needs.

The HDB Rule book has not only increased in thickness over the years, but now also has many addendums like band aids due to the numerous exceptions that have been made to the rules to cater to the many circumstances that have arisen. Whilst I commend the HDB for showing compassion and flexibility in the application of its rules and policies, there is the broader movement in the public sector to cut red tape and unnecessary rules.

I would like to highlight two policies in particular that require review due to changing market circumstances.

Firstly, the HDB concessionary loan. The policy allows all first-time flat buyers and first-time upgraders to have access to the HDB concessionary loan, but not first-time downgraders. This two-bite of the cherry policy for HDB concessionary loans was implemented in 1997 as part of the Government's anti-speculation measures at a time when the property market was buoyant and speculation was rife.

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Since then, the market has experienced a downturn and speculation has largely been curbed. Additionally, with the Government and even some finance practitioners now warning us against the dangers of over-consumption of property, why do we still need to penalise downgraders and not grant them the concessionary loan even though they qualify in all other aspects? Why deter people from practising prudence?

Instead of making exceptions to the rules for hardship cases, why do we not just equalise the policy and allow first-time downgraders to also enjoy a second HDB concessionary loan? According to MND, between 2002 and 2004, on average, about 12% of the total bank loan cases, or close to 4,000 cases, are downgraders and two thirds of the appeals for concessionary loans for 2004 and 2005 numbering some 1,000 cases were by downgraders. Hence, each year, there are a sizeable number of downgraders who are affected by this rule and the numbers could be more as others who wish to downgrade may have been deterred to do so by this rule.

Secondly, resale levy. This is a levy imposed on the sale proceeds of the first flat which is supposed to reduce the subsidy enjoyed on the second flat bought directly form the HDB. This works well under a rising market. However, HDB resale flat prices have fallen by more than 20% since the late 1990s. Hence, there are many who, if they sell their flat now, would suffer a loss. Even if this were not so, they might not have the cash to pay the resale levy for the purchase of the second flat since the gain from the first flat is low. This is a perennial complaint, but the Government's response has always been to return to first principles of why the levy was introduced in the first place. Sir, however right the policy intent may be at the beginning, the consequence in the end is possible hardship that, to my mind, negates the intent of the levy.

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Sir, a good policy intent is not a sound enough reason for bad policy outcome. One way to resolve this is to give the buyer the option of paying for the levy either as a percentage of the sale price of the first flat or as a premium of the second flat which will cream off the subsidy for the second flat, which is the real intent to begin with. A second but perhaps more radical way would be to simply sell all HDB flats at market value pricing with the additional restrictions placed on the first-time buyers of new HDB flats, and give the first and second-time buyers of such flats different quantums of housing grant, with the housing grant for the first direct purchase higher than the second. There is no necessity to impose a levy since the differential for the two housing grants will reflect the fact that buyers of a second flat will enjoy a lower subsidy. In a way, this is already being done for DBSS flats and HDB's unsold flats which are being sold in the resale market. In these instances, qualifying buyers are given housing grants to purchase these flats.

Dr Lily Neo (Jalan Besar): Sir, in recent years, more 2- and 3-room HDB flats are in greater demand. We also saw more downgraders than upgraders. May I ask the Minister how soon will he build these 2- and 3-room HDB flats and how many will he build in order to meet the present demand?

In the construction of these new flats, in view of our ageing population, will the Minister incorporate elderly-friendly features or lifetime designs that can be adapted as and when the needs arise? Will he also provide space on the ground floor of these HDB blocks for social purposes, such as childcare, student care or elder care centres? Will he also ensure the handicapped and elderly a friendly access environment for these new blocks?

Sir, will the Minister consider increasing the supply of HDB rental flats

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in view of our present shortage? Will the Minister make an exception on the HDB Joint Single Scheme for those with no immediate family members? It is very difficult for many singles to comply with this ruling by requiring them to live with complete strangers. Is it possible to build 1-room HDB rental flats or converting some flats to 1-room HDB rental flats in order to cater to singles with no family members to share their rental flats with.

More studio apartments and retirement homes will be needed to better accommodate the silver generation. Will the Minister consider releasing 30- or 40-year lease land to private sector enterprises to make retirement villages viable?

Mr Ang Mong Seng (Hong Kah): (In Mandarin) : Sir, on public housing policy, I have three questions and three suggestions.

Owing to a series of economic downturns and economic restructuring, some low-income families had no choice but to sell their flats to pay their debts. In fact, they came to a point where they were without resources. Even in such circumstances, they had to rent a place for their families to stay in. But according to the regulations of HDB, once you have sold your flat, you are barred from applying to the HDB to buy or rent another apartment within the next 30 months. They really did not know whether or not to sell.

Sir, I would like to urge the HDB to remove this regulation so that those who are forced to sell their flats because of financial difficulties will be able to rent a 2-room flat for their family to stay in.

Secondly, the HDB has announced that it will be building some 2-room flats for the public to apply. This is good news for

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those who are in financial difficulty. However, every day, when I travel to Jurong, I could see a lot of vacant 4-room or 5-room flats. I feel that the HDB should not just concentrate on building new flats. They should consider making full use of these vacant flats. Maybe they could be converted to 2-room or 3-room flats for sale or rent, so that these vacant flats will not be left unused. This is like killing two birds with one stone.

Thirdly, many of our young people are encouraged by the Government to become entrepreneurs and their educational level has gone up, their income is also higher. So now, when they get married, their combined income may be more than $8,000 which exceeds the ceiling imposed by HDB. I hope the HDB would raise the income ceiling for first-time applicants who are Singapore citizens, so that they will be able to purchase their first HDB flat, otherwise they would be deprived of the privilege of purchasing a new HDB flat.

Dr Ong Chit Chung (Jurong): Mr Chairman, Sir, last year, MND announced the Design, Build and Sell Scheme (DBSS) which allows the private sector to design, build and market HDB apartments in selected precincts. I welcome this innovative scheme. It is an attractive scheme for buyers, as the resale levy has been waived.

May I ask whether a developer has been awarded a DBSS tender? Further, will the price of these DBSS apartments be kept affordable? The potential buyers are expecting good designs and finishes, better than the HDB norm, while the private developer may wish to maximise his returns. Will there be a mismatch of expectations?

Sir, under HDB rules, upgraders are eligible for HDB mortgage loans, but downgraders are denied HDB loans. This is rather irrational, as many who

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downgrade are doing so out of desperation, as they are in financial difficulties. The banks may also not extend loans to them, especially if they are bankrupt. Will MND then review this and genuinely help the downgraders?

Mr Cedric Foo Chee Keng (West Coast): Mr Chairman, Sir, living in HDB estates is an important experience for Singaporeans. Like National Service, these HDB experiences have contributed immensely to the nation-building of Singapore. Interacting with neighbours of different races, customs, religions, and across socio-economic strata; deepening our understanding for one another's beliefs, customs and practices; lending a hand to help each other, celebrating our diversity and living as a closely-knit community - these are all valuable HDB experiences.

The current housing policy of HDB though is to avail new subsidised flats only to households with a monthly income of $8,000 or less. I agree that subsidies should go only to those who need them most. But, Mr Chairman, Sir, my proposal is for the policy to allow higher income households to also buy new HDB flats, say, 5-room or larger ones, but without subsidies. As many Members are aware, there is no scarcity of supply of the larger flats, unlike in the early years of the HDB. In fact, HDB has many unsold new flats, many of them in my constituency in Jurong West, as Mr Ang Mong Seng has pointed out. So, my proposal should not result in competition between income groups for the purchase of HDB flats.

Mr Chairman, Sir, it is important to allow more Singaporeans, especially young Singaporeans, to live in HDB estates. That way, more and future generations of Singaporeans can benefit from that very unique, special and common HDB experience that has proven to bind us as a nation.

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Affordable Housing

Mdm Cynthia Phua (Aljunied): Mr Chairman, Sir, I am pleased to note that the HDB will be building new 2-room flats to help those in the lower-income group to own their own property. This year's Budget has been sweetened by the news of the offer of an additional $20,000 grant in addition to existing housing grants. Can the Ministry provide more details on its building of the 2-room and 3-room flats - how many and where? I hope that the HDB, in its planning for the 2-room and 3-room apartments, does not build these flats in far-flung corners of the housing estates where the residents have to commute to get to the social amenities. If there are families which need help, these are the people who need it more than others. Help them by locating them closer to the markets, MRT stations and schools, so that they can save on transport costs. Will HDB consider to sprinkle the 2-room and 3-room blocks among the other bigger units so that there is a good mix near the town centre whenever opportunities permit? It will not be prudent to segregate the smaller flats in the periphery of HDB housing estates just because these buyers are paying less for their apartments.

Finally, in order for the applicants to know what are their chances of securing a 2-room or 3-room flat, will the HDB ensure that the data on the availability of these flats are released and are readily available, as well as on the number of people queuing for the flats?

Next, on loan for downgraders. I want to bring up the issue of helping the less fortunate people, especially to enable them to downgrade to a smaller flat. These are genuine cases of homeowners who are caught by circumstances beyond their control. In view of the restructuring of the economy, many found that they are out of job suddenly and they have to bite

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the bullet, and some even to suffer the ignominy of downgrading.

Can the HDB be more flexible in its policy and give these flat owners a loan to downgrade? It is ironical that the HDB expects them to turn to the banks to borrow money. For one, many will now not qualify for a bank loan because their combined household incomes are lower, either because a member of the household has lost his/her job or is now doing lower-paid job or having irregular incomes. Their household income has thus fallen. I hope the HDB will respond with compassion. Will the HDB review its policy on granting housing loans to those who want to downgrade? In fact, many took up the second loan without knowing HDB's intention to cap the two loans in the first place. This policy has only been introduced to cap the upgraders but has serious implications on the downgraders.

Moving on to the elderly, we now have more than half a million of our population above 50 years old. What is the HDB's projection on the need to provide senior citizen housing, specifically, what type of housing for senior citizens? Are we having elderly villages, studio apartments, 1-room, 2-room flats or multi-generation flats? What is the number of flats required in, say, five years, or long-term, say, 10 years, for our elderly? What are the specific features of these blocks of flats? What about recreational spaces as the current ones for 2-room studio apartments are very congested and they do not have many big courtyard areas? Do we have more outdoor spaces for gardening, physical fitness, in addition to recreational ones for arts and even for mahjong ?

I hope equal thought is given to the planning of flats for older people, as we do in the planning of new estates for our younger generation. At this point, I would

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like to appeal to the HDB to spend more time in the R&D for lifts for our four-storey walk-up flats and not to wait till MDN has fitted out all the higher blocks of flats.

In conclusion, we can take pride of the strides that we have made for the early days of having to resettle squatters and providing opportunities for our people to upgrade. At present, most of our people, almost 90%, are housed in HDB flats. It is time to allow more choices of flats for our people. We must review our policies for housing, not only to encourage upgraders, but be open to allow our people to move to housing types suitable for their needs within their lifetime, even if it is to move to a 1-room, 2-room, rental or purchase flat.

Mr Othman Haron Eusofe (Marine Parade): Sir, like Mdm Cynthia Phua, I would like to ask the Minister to provide details of the 2-room HDB flat development programme. What are the eligibility criteria and the pricing of these flats? To make these purchases more affordable, would the HDB consider shorter term leases, say, 60 years, and longer repayment periods? Will lower-income workers who currently own bigger flats and who are in financial difficulties be allowed to downgrade to purchase the 2-room flats without having to fulfill the debarment period and also to be given HDB concessionary loans?

Sir, I have two other questions. Some owners who took bank loans had their flats repossessed by the bank. Can urgent assistance be rendered to them to rent HDB flats? Finally, what is the progress of the study to help flat owners in difficulties to monetise their flats, ie, the reverse mortgage scheme?

Public Housing

Dr Wang Kai Yuen (Bukit Timah): Mr Chairman, Sir, like Dr Amy Khor, Dr Ong Chit Chung and Mdm Cynthia Phua, I am

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also bringing up the subject of downgrading by HDB tenants. This is not a new topic, as there were discussions in this House regarding the concept of reverse mortgages for retirees to fund their retirement. However, when such discussions arose in this House, the Government has always asserted that the private sector should take the lead. So far, proposals by the private sector and insurance industry have not been that advantageous to the tenant. The question is: why should the Government not take the lead in this area by facilitating HDB tenants to downgrade through selling their flats in the open market and then buying a smaller flat either from the resale market or from HDB directly?

Sir, currently, HDB only has policies promoting upgrading. If a person needs to downgrade, he is on his own - no second bite of the cherry, no HDB loans, even if it is only the second direct purchase from the HDB. Such policies were put in place in the age of high growth and when asset enhancement was the mantra of the time. However, it looks like those days are gone and will not come back in a very short time. HDB has already recognised this trend by reversing the building programme and reviving it to include 2-room flats. Yet, the rest of its policies are still oriented towards upgrading. I think it is time for the Government to review its housing policies as our population ages and as the economy matures. Our current policy to promote upgrading is like driving a car stuck in high gear. As the car slows down, it is time to down shift. But we cannot. If we do not, then the engine will sputter and die. I urge the Minister to review the HDB policy to allow downgrading as well as upgrading, so long the tenants do not violate the "two bites of the cherry" policy.

Two-room HDB Flats

Mdm Halimah Yacob (Jurong): Sir, to help low-wage workers own their own

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flats, the Low-Wage Workers Committee has recommended that HDB build more 2-room flats to widen the affordable housing options for low-wage workers. It also recommended that low-income families which are in difficulty and which want to downgrade to a smaller flat or even to subsidised HDB flats should be assisted to do so to alleviate their financial burdens. I would like to ask the Minister what steps are being taken to achieve these recommendations.

Firstly, when will HDB start building the 2-room flats and when is the completion date? How many units will be built? What is the price range and in which locations? As the objective is to make it possible for our low-income earners to buy their own homes, the HDB's pricing of these flats should be made very affordable. As a recent report shows, the prices of 2-room flats have gone up by 25% because of the surge in demand, particularly from singles.

Secondly, Sir, like my other colleagues, currently, I note that HDB is very selective in allowing someone who wishes to downgrade to a smaller flat because of financial difficulty to do so. This causes hardship and immense frustration to those who are affected and who struggle very hard to settle their debts. Can the Minister enlighten this House whether this policy will be reviewed to make it easier for those facing financial difficulty to downgrade to a subsidised flat and secure a HDB loan?

Mr Steve Chia Kiah Hong: Sir, I give credit to the Government for restarting the building of 2-room HDB flats. Not every one can afford those bigger flats, despite the fake market price subsidy.

For varying personal reasons, not every one wants to or can even own the cheaper 2-room HDB flats to be built. The Government should not be over-zealous in its asset-ownership programme

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to force every citizen to own properties. I hope the Government will consider booking some of these new 2-room flats for subsidised rental first to help those problem families until

they can afford to buy flats at a subsequent stage, that means, more rental units available.

Housing for Low-income Families

2.45 pm

Dr Amy Khor Lean Suan: Sir, the low-income housing grant which has been announced as part of the Workfare package is welcomed as it will make it easier for low-income families to own homes.

However, Sir, I am very concerned that some low-income earners might over-stretch their budget in a bid to own a home. This could worsen their already tight financial position. This is, in fact, the situation a sizeable number of home owners are in now due to the housing fever in the early to the late 1990s.

The very low-income households in the lowest 20th percentile may have very little, if any, extra money left after paying for all their household needs. This group should be especially cautious when deciding to buy a house. For them, their monthly debt service must be kept to a minimum and should preferably not exceed the monthly rental payments that they might already be incurring on their flats.

The normal rule of thumb of allowing monthly debt service at between 30%-40% of the household income would not be realistic for such cases. Hence, HDB should be more stringent in their credit evaluation criteria for these purchasers and advise them to be prudent.

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Home ownership, for all its social and nation-building benefits, should not come at the expense of budgetary prudence. Perhaps, a lower ratio of monthly loan repayment to household income should be placed for at least the lowest 20th percentile income households to prevent over-consumption. I support the Ministry's current thinking to place an income ceiling for purchasers of the new 2-room flats to be built so as to allow the lowest income households to have priority over these flats. I would also like to urge the Ministry to build these flats in more accessible locations as the low-income households are highly sensitive to transportation cost. Furthermore, I would like to urge the Ministry to integrate these 2-room flats with other flat types to avoid the social stigma that might be attached to a precinct made up entirely of these smaller flats and to facilitate better social integration.

These 2-room flats should also not be too small to ensure liveability to both low-income couples as well as to those with, say, one or two children. Hence, they should be at least equal in size to the existing 2-room flats which are about 45 square metres or slightly larger. They could be built in a mix of locations in both new and mature estates to provide choice.

A good way to gauge demand for these flats would be to sell them under the BTO system. HDB could also consider offering some of the existing 2-room flats for sale to the sitting tenants, much like what has been done previously for the 3-room flats.

Dr John Chen Seow Phun (Hong Kah): Mr Chairman, Sir, I think I am the only one who has asked for 10 minutes in a COS cut. I think the Minister should thank me for it because he would have more time to reply.

There are many low-income families who own an HDB flat but are struggling to

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pay their HDB mortgage loans. In fact, most of the HDB cases I received from my residents at the meet-the-people sessions in recent years were about their inability to service the loans.

Although HDB is flexible in terms of granting deferment to the repayment of loans or the restructuring of the mortgage terms, the problem does not go away if these low-income families continue to be unemployed or under-employed, which is the case even when the economy recovers because these house owners are mostly the older workers who are also lower-educated. They are suffering from what we call structural unemployment.

There are three ways HDB can do to help these families.

First, let them include either their spouses or children as co-lessees, as the case may be, to help pay for the loan.

Second, many MPs have spoken about it, and that is to help them downgrade to a smaller flat.

Third, provide additional housing grants to these families, similar to additional housing grants announced by the Prime Minister in the Budget to help low-income families to own homes.

Sir, although HDB tries to help these families solve their problems, I find that the current policies are less than satisfactory. Let me cite examples and explain.

First, include either the spouse or children as co-lessees. I have appealed in a few cases, on behalf of my residents, to include either the spouse or children as co-lessees to help pay the mortgage loan. To me, this is straightforward and could solve the problem immediately. However, I am surprised at the reply I got from HDB which, while allowing the appeal, offers no help at all.

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To substantiate what I say, let me show an actual HDB reply to an appeal to include the daughter as a co-lessee. First, to include the daughter, it entails the transfer of ownership from the parents to themselves plus the daughter. That means the parents have to sell the flat to themselves and the daughter. I have no problem even with that if that is a legal requirement. However, since it is a transfer of ownership, HDB then treats it as a new loan. And because the prevailing market value of the flat is low, the new loan works out to be smaller than the current outstanding loan. The outstanding loan owed by the parents is about $205,000 as shown here. The new loan is about $193,000. So there is a shortfall of $12,000. Since the daughter's CPF balance is only about $7,000, the family is required to provide a cash top-up of about $5,000.

May I ask the Minister: how is the family helped? If they can afford the $5,000, they would not have come to the meet-the-people session in the first place. So if they cannot afford the transfer, and the problem drags on, may I ask: is HDB better off? Is HDB still not owed the outstanding loan of $205,000 which has become problematic? The wise and pragmatic thing for HDB to do, in my view, is to let the family retain the same amount of loan before the transfer.

Second, some low-income families sometimes asked to downgrade their flats. This is one good way to solve their financial problem. However, upon selling their flat, Members know that HDB's current policy is to debar them for 30 months from renting or buying a second flat from HDB. Although HDB presently does allow appeals for hardship cases, it does so sparingly. Many of them were advised by HDB to rent a room in the housing market or to borrow from the bank to purchase a smaller flat from the resale market.

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Sir, these low-income families who wanted to downgrade are doing so because they do not have money. And because many of them might be unemployed or under-employed, the banks would not provide them a housing loan. HDB's advice is therefore of no help at all. Many of them therefore dare not sell their flats because they are not sure if they can find a roof over their head. Can the Minister therefore review the policy? Clear guidelines can be set to allow renting or buying a second flat from HDB. We are told that HDB will be building 2-room flats in the future, and these flats would be ideal for those who want to downgrade. Further, if the family is downgrading by buying a smaller flat from the resale market, then HDB should give them a second loan, just like it will give to those who upgrade.

Third, additional housing grants. Sir, the Prime Minister said that these additional housing grants for the low-income families to purchase their first home will be a permanent budget allocation. This is good. However, for those who have already bought a flat but are struggling to pay their mortgage loan, they are left out. Dr Ong Seh Ong told me that he spoke about this in the Budget debate but he lamented that the Prime Minister did not answer this point. So I would like to bring up this point again. These are families who heed the call of the Government to own their home and worked hard to pay for it. But because of the structural unemployment that befalls us, they are now in a difficult predicament. Why can the Government not also extend the additional housing grants to them? A means test can be devised and administered. It can also be stipulated that the grants can only be used to pay part of their mortgage loan monthly. I think this will go a long way in helping these families pay for their flats. I hope the Minister can look into this and

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see whether these families can be given such help.

Sir, I hope the Minister will address the three points that I have brought up.

The Chairman: Mr Wee Siew Kim. You have two cuts, take them together.

Housing for Displaced Parents

Mr Wee Siew Kim: Much focus has been placed on our elderly in this Budget and the pro-family policy is also very clear. Unfortunately, my experience at my MPS indicates to me that there is still a group of elderly that needs special attention and help.

A typical scenario starts with the parents selling their flats and using the proceeds to subsidise their children's flats, even paying for part of the renovation and furnishing, all hoping to stay together. Their expectation is that the extended family will live harmoniously together ever after but then often, relationships sour. These parents find living with their children more and more unbearable or are forced out of their children's units.

These elderly have nowhere to turn to. Yes, we do not want to encourage dysfunctional behaviour if too easy an option is available but, without doubt, the objective is to ensure families stay together. However, let us be realistic and acknowledge that there are severe strife and tension within some of these families.

I would like to ask if we can provide some accommodation to these displaced parents and find a way to get their children to shoulder some responsibility perhaps through the Maintenance of Parents Tribunal.

Single Home Ownership Policy

The HDB has a pro-family policy for good reasons. However, we must

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recognise that as a country ages, there is a growing number of aging singles.

I guess people are single for many reasons. Some stay single because they have to shoulder the responsibility of looking after aged parents or siblings who are unable to fend for themselves. Others have not found their soul-mates. Being married, I may not know all the reasons. But whatever their reasons, they are all Singaporeans. Most of them are gainfully employed and they contribute to what Singapore is today. However, they do not enjoy some of the benefits that the married citizens enjoy. They feel that they are being unfairly treated. While some do support the pro-family policy, many feel that once they are past the age of 45 years old, the likelihood of them starting a family is getting smaller and smaller. So why should they continue to be penalised?

The Chairman: Mr Wee, your time is up. Order. I propose to take the break now.

Thereupon Mr Speaker left the Chair of the Committee and took the Chair of the House.

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 3.20 pm.

Sitting accordingly suspended

at 2.58 pm until 3.20 pm.

Sitting resumed at 3.20 pm

[

Mr Speaker in the Chair: ]

Debate in Committee of Supply resumed.

[

Mr Speaker in the Chair: ]

Head T (cont.) -

The Chairman: Prof. Chin Tet Yung. Five minutes.

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Commercial Loans

Assoc. Prof. Chin Tet Yung: Mr Chairman, Sir, before the economic downturn and restructuring, many Singaporeans who were holding decent and well-paid jobs went ahead confidently to buy larger flats at extremely high prices. At that time, HDB loans were easily made available to all Singaporeans who had a job. This made it easier for many to upgrade and buy larger flats. However, when the property market began to stagnate and prices of flats dropped appreciably, many found themselves trapped as they were servicing loans that were much higher than what their flats could fetch. This came as a shock for many Singaporeans at a time when everyone thought that property was the best investment one could ever make in Singapore. As years go by, we are now seeing Singaporeans caught in this property trap, that is, having bought high, they now have difficulties paying off their mortgage loans due to retrenchments, pay cuts and higher cost of living. They are having difficulties keeping their flats as their pay now no longer can support their instalments. But HDB's policy of two concessionary loans have remained, and they find that they are no longer eligible for a HDB loan. So these people have to obtain commercial loans, which are based on their ability to service their loans which, in turn, is based on whether they have steady and well-paying jobs as well as a clean credit record.

Now, we see two problems. If they sell the flat, they would have to sell at a much lower rate and many would need to top up substantial amounts to get rid of their flats, as Dr John Chen had vividly described just now. Where can they get the money? Secondly, if they are able to sell their flat and downgrade to a smaller flat, they would not be eligible for a HDB loan. They would have to get a commercial loan which, as we have said, is not easy to obtain. People who have to

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sell their flat at this juncture will have difficulty already of servicing their current flat due to loss of incomes or pay cuts. And, if that is the case, the banks would not loan them money. So they are in a bind. They are in a trap. The Government explains to say that Singaporeans have to be responsible for their own finances and not to over-commit, but harsh changes and measures should really be implemented only when Government has educated and prepared the people for the changes. I think there was no sufficient preparation.

In this instance, many Singaporeans were not forewarned about the potential losses when the property market turned downwards and they now have to face the prospect of homelessness, once the commercial banks repossess their homes. They would have lost their CPF savings as well. So, there are basically two initiatives I hope HDB can consider. The first, as many Members of the House have said, can HDB exercise some flexibility and help by changing their two concessionary loans maximum policy and provide a loan to those who are in this situation? Many of them who come to our MPS have said that they just want a loan. They do not mind if it is not on concessionary rate of interest. They just want a loan.

Secondly, if really the owners have no means to pay, HDB can provide them with a rental home at cheaper rates, so that they and their families can at least have a roof over their heads.

Finally, can the Government help by advising and persuading commercial banks to be more understanding of the travails of such families and provide flexi-instalments or refinancing flats, if possible.

Also, can we provide counselling for such families to tie up with all aid

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agencies because, at the moment, they are asked to go from one to another - CDC, HDB, MCYS, VWOs? Can we have a one-stop service to help them manage their financial problems when it comes to the loans?

Mr Ahmad Khalis Bin Abdul Ghani (Hong Kah): Sir, when the HDB introduced its policy on commercial loans a few years ago, members of the public and the House voiced concerns that this would signal an increase in foreclosures on HDB flats. May I ask the Minister on a more specific point about the number of cases of banks taking legal action in court to repossess HDB flats in 2004 and 2005 and, in how many of these cases were the flats actually foreclosed?

The HDB, in showing some flexibility, did stipulate that only third-time direct purchasers are barred from HDB concessionary loans. This, in principle, allows citizens to benefit from HDB concessionary loans at some point in time. The problem is, as stated by my learned friend before me, at the time the policy was introduced, those who had already used their quota suddenly found themselves without a lifeline which they hitherto thought they had. In addition, a number of them who managed to get commercial loans were hit by the economic restructuring and crises.

May I ask the Minister how many of the foreclosure cases were due to the economic crises and restructuring? May I also ask the Minister what happened to the owners of foreclosed flats, bearing in mind that they no longer could borrow from banks and possibly even from the HDB to buy another flat? Is it not true that such ex-owners also face problems paying rents at commercial rates due to the financial problems that they face? To what extent is this a challenge and does this not undermine our policy of home ownership for all Singaporeans?

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Reverse Mortgage

Mr Chay Wai Chuen (Tanjong Pagar): Sir, I would like to talk on this topic of reverse mortgage first raised by the Howe Yoon Chong Report in 1984 and also recently in the Report on the Aged that recommended the development of the reverse mortgage scheme as a means of monetising the home asset for the aged.

Sir, I first raised this topic in Parliament in my first speech in 1988 and, ever since then, several other Members of this House have also raised this topic. It is a topic that does not die and, with each year, the problem of the aged facing the retirement days becomes more urgent.

Reverse mortgage was piloted in the United States for 10 years since 1988. It was established as a programme under the Housing and Urban Development (HUD) in 1988. There is demand for this product by a category of people, those retirees who are 60. There is a need for this private sector participation but there is also a need for the Government agency to undertake what I would call an underwriting role. The Government cannot run away from this role, if such a scheme is to be a success. Such a scheme, if it is to succeed, is as much a task for the MND or HDB, as it is for the Insurance Commissioner. Performing a market risk balancer role is a legitimate role of Government, particularly so, as it can provide a safety net for the many senior citizens currently 65 and over, who have nothing much more besides the flat as their asset.

I am not asking for this risk underwriting role to be done for every house or every home category. It is not necessary. Private sector homeowners can sell away their properties and downgrade and cash out. But 3-room HDB flat owners have to wait 30 months, before they can rent.

And renting a 1-room flat is a very drastic way to

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downgrade with other restrictive conditions. Even so, their rental housing is also subsidised and paid out of public funds. With a reverse mortgage, the home owner can continue to stay in the flat. He is accumulating debt to set off his equity - not a sin in financial management.

3.30 pm

Issues like age of the flat, mortality, age group, interest rate volatility and insurance rates can be factored. We can begin with 3-room HDB flats that have been fully paid. These are flats which the owners bought for $6,800 in the mid-60s and, today, can be sold at about $150,000 in areas like Queenstown, for example. At 20-25 year term, in terms of annuity, the monthly pay out could be computed, depending on the factors used, say, between $500-$1,000 per month. At an average of $700 per month, it is comfortable to sustain the elderly without medical cost, which is covered separately by medical insurance.

The post-war baby boomers are coming home to roost. The first one among them turns 60 this year. The wealth of the average Singaporean was built up in one generation - the legacy of the Minister Mentor, from third world to first world in one generation. It is a unique legacy. It is now time that we should imaginatively build on this to give hope and to make life more meaningful for the elderly Singaporeans. The average Singaporean's wealth is his HDB flat, after he has paid for all his children's education and other obligations. So, let us not tarry, and let us do something to build the safety net for him by showing him the meaning of home equity.

HDB Downgrading

Mr Wee Siew Kim: Sir, HDB downgrading is a new phenomenon brought about by the confluence of the

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weak economy in the last few years and the ageing of owners of larger units. Their children have left the nest and they no longer need to have larger premises. Downgraders are adversely affected by our current two-strike rule. After purchasing two flats directly from HDB, the second one probably as a result of upsizing as the family unit is growing, they are no longer eligible for direct purchases from the HDB. Flats in the open market cost much more which they can ill afford to spend on as they are nearing retirement and have to conserve their funds for living and medical expenses.

I hope the Ministry can find more flexible approaches to meeting the needs of downgraders with financing and purchase options. One possibility is to allow buyers over the age of 60 years to purchase smaller HDB flats at preferential rates regardless of whether they have bought HDB flats before.

Ethnic Integration Programme

Dr Wang Kai Yuen: Sir, I would like to ask whether it is possible to preserve the ethnic integration policy (EIP) of HDB while minimising the impact on the affected individual. I would like to state, at the outset, that I support the broad objective of the policy, which is to maintain a balanced racial mix in our HDB housing estates where some 90% of Singaporeans live.

Sir, under our current policy, limits are set for each ethnic group to achieve a balance of various communities in the neighbourhood as well as within a HDB block. Residents can sell their flats in the open market only to eligible buyers of similar ethnic group. Each year, about 300 flat sellers face problems in selling their flats because of this EIP. Yes, this represents less than 1% of HDB flat

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sellers, but I feel that we can do more to help these owners.

I have come across a family in my constituency who has lost the head of household. As a result, the family could no longer afford to stay in their 5-room flat. Yet, because of this policy, they have a hard time finding a buyer. This is another MPS helper in my constituency who is facing bankruptcy but having similar difficulties in selling her 5-room flat. I am sure my colleagues in this House could come out with many more such examples.

Sir, unlike the Workers' Party, I do not propose that we do away with this policy, which has served Singapore well. Indeed, the EIP is the cornerstone policy to preserve the racial and religious harmony in Singapore through the HDB living experience, as mentioned by Mr Cedric Foo. My question is more a philosophical one. The EIP is meant for the good of the community. However, the cost is borne by the individuals affected. When the housing market is on the way up, the burden is bearable. Individuals just make less money when they sell their flats. Hopefully, if they were to buy another flat, they could also pay proportionately less as well. However, when the market is on the way down, like in the last few years, or stagnate like now, the loss would be substantial, as many would be saddled with negative equity.

Sir, since this policy is meant for the common good, would it be possible for the community to bear the burden instead of having the individual home owner to shoulder this burden of implementing the EIP? I hope the Minister could review this policy.

The Minister for National Development (Mr Mah Bow Tan): Sir, I would like, first of all, to thank the many Members who have spoken on public housing policy, led by Dr Amy Khor, Dr Lily Neo, Dr Ong Chit

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Chung, Dr Wang Kai Yuen and many others. They have raised many important issues and I will address each one of them in turn. But, first of all, allow me to start from the beginning.

Our public housing programme is one of the success stories of independent Singapore. Today, 84% of Singaporeans live in HDB flats, and out of this 84%, 95% of them own their own homes. No other country in the world has done as much for its citizens in this area, and I think this is something that we really should be very proud of. Owning a home has given Singaporeans an asset as well as a physical stake in the nation. It has also strengthened our social cohesion and our sense of belonging to this country. So, when an NSman does his National Service duty and does his incamp training, he knows that he is training to defend his country. He is also training to defend his family and his home.

We will continue to assist Singaporeans to own their homes. Let me touch on the three ways in which we encourage and promote home ownership. The first and most fundamental, of course, is that we price our flats affordably. In other words, we price them in such a way that most Singaporeans - up to 90% of Singaporeans - can own, at least, a basic flat.

Many Members have at various times, asked me, "What do you mean by affordability? How do you know that people are able to afford the flats?"

One conventional way of measuring affordability is to relate it to income. In other words, what percentage of their household income is used for housing? The accepted norm by banks and by other housing authorities around the world is that it is considered affordable if less than 40% of the household income is used for housing. This is known as the debt service ratio. And if the debt service ratio

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is less than 40%, then usually we say, yes, that particular type of housing is affordable to that family.

What about Singapore? What is the situation here? Last year, those who bought their flats from HDB used, on average, 20% of their monthly household income to service their housing loans. In other words, we have a debt service ratio of 20%, which is considered to be very comfortable, in terms of servicing a housing loan.

Further, because we have CPF in Singapore, what this means is that most of our flat buyers can service their housing loans entirely from their CPF contributions, without touching their take-home pay. By "most", I am talking about 70% of flat buyers.

The second way in which we promote home ownership is to give generous subsidies to first-time citizen households. I do not know whether Singaporeans appreciate how much they get in total, in terms of the housing subsidies.

Let me elaborate. Those who purchase a resale flat can, of course, get a CPF housing grant, ie, either $30,000 or $40,000. Those who buy a new flat will enjoy an even higher subsidy. Now, as the Prime Minister announced in his Budget Statement, we are going to provide an additional CPF housing grant of between $5,000 and $20,000 to first-timer households who are earning below $3,000 per month. These are explicit and substantial subsidies. These are cash subsidies. And if we add it all up, assuming that a first-timer household is buying a resale flat, living near their parents, they get $40,000. If they are earning, say, below $1,500, they may get another $20,000. So it is $60,000. If we compare that with the price of a 3-room resale flat, we are talking about as high as 40% of the price of a 3-room

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resale flat in a non-mature estate. And that is not all.

On top of that, if one takes an HDB concessionary loan to finance the purchase of his flat, he is enjoying an additional subsidy. How much subsidy are we talking about? If a person takes a $100,000 30-year loan and if he assumes a 1% interest subsidy, we are talking of a subsidy of more than $10,000, over and above the upfront subsidy.

Because we want to encourage social mobility, citizen families can get a second housing subsidy, which is known as the second bite but, of course, the second bite will be smaller than the first bite. And if they are upgrading to a larger flat, they can get a second concessionary loan - again, another bite.

Recently, the Department of Statistics (DOS) did a study on housing mobility of Singapore resident households over the last 10 years. It showed that of the estimated 354,000 households who changed residence during this 10-year period, more than 60% upgraded to a larger house type. This trend was particularly evident among the 1- to 3-room households. Over 80% of them had upgraded to larger housing types 10 years later. DOS will be releasing the study findings later. But what this shows very clearly is that our home ownership policy has succeeded in promoting social mobility among Singaporeans, giving them a chance to move up, giving them hope for the future, giving them a chance to own the home of their dreams.

The third way in which we promote home ownership is that we will continue to provide a range of housing options, so that Singaporeans can purchase a flat that they can afford, a flat that is suitable for them and for their families, ranging from

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the studio apartments - the smallest flats - to the 2-room flats, which I will elaborate on later, 3-room flats, 4-room flats, 5-room flats and up to the Executive Apartments. This range of options for Singaporeans allows us to fulfil our promise that 90% of Singaporeans can afford a home - at least a basic flat in Singapore.

3.45 pm

Sir, let me now touch on the additional CPF housing grant which I mentioned earlier. The purpose of the grant is to help lower-income first-timer households build up their assets, to give them a stake in Singapore. Dr John Chen and a few others asked: why only first-timer households, why not give it to second-timer households, why not give it to those who are in financial difficulties? Sir, we have first-timer households who have not yet had a flat. We would like to encourage and assist them to get on to that first step of the home ownership ladder. As for the second-timers, ie, the people who have already owned a flat, there are many other ways that we can help them financially. The purpose of the grant is not to solve their financial problems. It is, as I said, a way for us to help the low-income particularly to build up their assets to own their first home.

To qualify for the grant, first-timer citizen households must satisfy the usual eligibility criteria for the purchase of a subsidised HDB flat, namely citizenship, family nucleus and non-ownership of private property. They will qualify for the additional grant whether they purchase a new flat from HDB or a resale flat with the existing CPF housing grant. In other words, if you buy a new flat, you are already enjoying an implicit subsidy. So you will get the additional housing grant on top of that. If you buy a resale flat, you will get two grants - the first grant and the additional grant. The lower-income households that are earning below

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$1,500 per month will receive the maximum grant of $20,000, because obviously they need the greatest help. This grant will be in addition to existing housing subsidies. It will be paid into the CPF Ordinary Accounts of eligible first-timer households. Similar to the existing CPF housing grant, flat buyers can use the additional grant to pay for their flat, including the downpayment. This will make it easier for eligible first-timers to purchase a flat.

Dr Amy Khor cautioned that we should guard against some of the unintended consequences of low-income families, for example, not being able to pay for their mortgage instalments. I think this is a very valid concern, and I share her sentiments. We want to help low-income families to , as I said, get on the ladder of home-ownership. But we must also make sure that they are aware of the responsibilities of home-ownership, and that they are ready for the long-term commitment that comes with home-ownership, because it is indeed a long-term commitment. So I would like to repeat the message that I have constantly sent to all flat buyers, which is to remind them of the need to exercise financial prudence and to remind them to purchase a flat only if they can afford to and to choose a size that they can afford. They should take into account factors such as the stability of their household income and the projected financial needs of their household, because this may affect their future ability to service the mortgage. To drive home this message, HDB will provide all mortgage loan applicants with credit assessment and financial counselling.

For the purpose of credit assessment, HDB will assess household income based on the average income over a two-year period preceding the flat purchase. In addition, we will require at least one of the flat buyers to be in continuous employment for at least two years prior to

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the flat purchase. Again, the purpose of this is for financial prudence, to ensure that the flat buyer has a steady income to service the mortgage loan.

I expect 6,000 households, or roughly 40% of the first-timers, applying to buy HDB flats, whether new or resale, to be able to take advantage to qualify for the grant. This will go a long way towards helping them achieve their dream of owning their first home, and a stake in Singapore.

Sir, let me now touch on the issue of 2-room flats. PM announced in the Budget Statement that HDB would resume building 2-room flats in order to make it more affordable for low-income households. As Members may know, HDB stopped building 2-room flats for sale in the early 1980s, at around the same time that we stopped building the 3-room flats, because at that time, most buyers were opting for larger flats. Today, there are about 6,300 2-room sold flats in the market. In recent years, demand for 2-room resale flats has increased sharply, mainly from singles and second-timers. As a result, resale prices of 2-room flats have shot up, increased by 36% since 2002, when the market as a whole went up by about 6% or 7%. The DOS study, that I mentioned earlier, also showed that among those who shifted to smaller house types between that 10-year period, 1995 to 2005, a higher proportion of those in their fifties and sixties moved to 1- and 2-room flats compared to the younger age groups. This is not surprising because as our population ages, as life-cycle needs change, it is quite natural and in fact it is a wise thing to do, to right-size and move to a smaller flat. So it is timely for HDB to be building 2-room flats again. This not only will help the first-timer low-income households who may not otherwise be able to afford a flat, but it will also help the second-timer households who wish to move to a smaller flat for family life-cycle reasons or financial reasons.

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The new 2-room flats will be priced in such a way that they are affordable to first-timer households at the 10th income percentile, which is around $1,000 per month, based on DOS data. Of course, at this income level, they will qualify for the additional CPF housing grant as well. To keep prices low, the flats will be built in non-mature estates for a start. I hear the sentiments of several Members - Mdm Cynthia Phua, Mdm Halimah, and others - that we should bear in mind that the flats should also be scattered in mature estates. I agree that eventually, we should do that. But I think, for a start, let us build them in the non-mature estates.

Mr Othman Haron Eusofe asked whether they will be on shorter lease - 60-year lease. I presume Mr Othman feels that we can make the flat more affordable if we reduce the lease by one third, because there is land cost involved. This is really not the case. We are not able to proportionately reduce by one third, so the saving is really not that much. Like all other new HDB flats, we will be building the new 2-room flats and they will come with the 99-year lease. Because it will be a better store of value, and it will allow the owners eventually to convert the flat to cash one day.

To ensure that these flats cater to the target group, we will set a monthly household income ceiling. This household income ceiling for 2-room flats will be $2,000. This roughly corresponds to the 25th household income percentile, and it is between the $1,500 household income ceiling that we apply for subsidised HDB rental flats and the $3,000 which we apply for 3-room flats. Of course, those earn more than $2,000 should be able to afford the 3-room or even larger flats.

HDB intends to launch the sale of the first batch of 2-room flats in Sengkang, comprising about 90 units, under the

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Build-to-Order (BTO) system by the middle of this year. The flats will be about 45 square metres in size. Dr Amy Khor said that it should not be too small. I agree. I think 45 square metres, and I have seen some of the 45-square-metre flats, is quite comfortable. I think it is a nice size. We will of course integrate it with the 3- and 4-room flats. We will not build stand-alone blocks because it is very important for us that all our HDB estates are mixed in all various aspects. We will finalise the flat pricing nearer the launch but, I repeat, we will ensure that they are affordable to the target group.

Dr Lily Neo asked whether these flats will have elder-friendly features. I will ask HDB to take this into account when we build the flats.

Mdm Cynthia Phua asked how MND intends to meet the needs of lower-income households and downgraders while the 2-room flats are being built. Mr Ang Mong Seng suggested that HDB convert some of the unsold 5-room flats in Jurong West into smaller 2-room flats. I am happy to inform them that we are going to do that. We will implement a pilot project and we will convert some of these unsold 5-room and Executive flats in Jurong West into either two 2-room flats or, maybe, one 2-room and one 3-room flats, depending on the size of the flat and the configuration. In this way, we will be able to meet the demand for these smaller flat types much quicker. I hope that we will be able to have the first batch of 100 converted 2-room flats available for sale and occupation before the end of this year.

Let me turn now to Dr Ong Chit Chung. He asked several questions about the Design, Build and Sell Scheme, or what we call DBSS, for short. Let me recap again for Members' information. Under the Design, Build and Sell Scheme (DBSS), the private sector is the one that will take over from HDB the entire

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development chain, meaning from tendering of the land to the design, construction and pricing of the flats. Why are we doing this? We hope that through private sector participation, we will be able to see more innovative flat designs, they will do things that HDB may not think of doing, we will give ourselves wider choice of flats and, ultimately, I hope better value-for-money for flat buyers.

We launched the pilot DBSS site in Tampines last year. The tender closed towards the end of last year. There was very good response. The successful tenderer is likely to launch the sale of the flats in the second half of this year. What is the pricing? I do not know. Because as I said, the pricing of these flats will be determined by the developer. Of course, they will have to take into account the general market conditions, the conditions of the housing market as well as the conditions of the local market flat prices in the vicinity of their development. HDB's involvement will be in disbursing the CPF housing grant of $30,000/$40,000 to eligible first-time buyers because the flats obviously would be sold at market rates.

We will await the response from flat buyers to this pilot project before we decide whether and where to launch the next few DBSS projects.

Sir, let me now deal with a host of issues which touches on the public housing subsidy or, more precisely, the allocation of public housing subsidies. There have been many calls by Members for HDB to be more generous in its allocation of public housing subsidies to be more flexible, to be more understanding, and to give more assistance to many groups of people - downgraders, older singles who want to buy direct from HDB, elderly singles who want to live in HDB rental flats on their own, and so on and so forth. Mr Wee Siew Kim talked about displaced parents

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and older singles. He confessed that he did not quite understand the problems of singles because he is not single. But I thought he was single once! So he should understand.

4.00 pm

Sir, I really wish I could accede to all these suggestions, as I believe that all these groups have genuine needs to varying degrees. Unfortunately, this is not possible, because life is not so simple. It is always about scarcity of resources and how we allocate these scarce resources. I have attempted to set out three simple rules so that we can all be on the same page, as it were, when it comes to allocation of housing subsidies.

Rule 1: Serve the public good

Public housing subsidies serve important social objectives and reflect our societal values. For this reason, our public housing policies are pro-family and promote the strengthening of family bonds, and through the way we disburse public housing subsidies, we also aim to promote rootedness and social mobility among Singaporeans. And because we try to achieve these social objectives, we are able to justify using taxpayers' money to provide housing subsidies. That is Rule 1: serve the public good.

_Rule 2: Give more to those who need more
_

Those who are in greater need of assistance will receive more. For this reason, first-timers who have yet to own their homes are given priority over second-timers. Similarly, families are given more subsidies than singles. It is not that singles do not get any subsidy, and I will elaborate on that later. But they will get less than families. Why? Because families need them more. Citizens get subsidies; PRs do not. So,

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Rule 2: give more to those who need more.

Rule 3: Remember that money is never enough

There is a limit to the amount of housing subsidies we can provide. For FY06, if Parliament approves, my Ministry will be given $1.24 billion to fulfil our mission, ie, "to create the best physical and living environment for building a vibrant city, a robust economy and cohesive communities." Out of this total of $1.24 billion, $878 million, or 71%, will be spent on public housing. We will use it to finance the various public housing programmes, including subsidies for sold and rental flats, CPF housing grants, upgrading, estate renewal programmes, and other major infrastructure projects. The bottom line is that increased expenditure in any one area means that something has to give in other areas. So, that is Rule 3: money is never enough.

Let me now, having set the three rules, see how it applies to the various specific suggestions that Members have made.

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Mr Cedric Foo and Mr Ang Mong Seng suggested that we remove the income ceiling for the purchase of subsidised HDB flats so that even high-income households can enjoy one subsidy. I am all for as many people as possible living in HDB flats going through the HDB experience. But I think there has to be a limit, a cut-off. The current HDB household income ceiling is $8,000. What is $8,000? $8,000 means that almost 90% of households in Singapore can or are eligible to purchase a subsidised flat. So what are we talking about if we were to increase the ceiling? Should we subsidise the top 10% of households to purchase subsidised housing? I do not think so. By any standard, this is already extremely generous.

Mr Cedric Foo also suggested that we allow high-income households to buy new flats at market prices. Yes, I think that is a workable solution. In fact, HDB has indeed put some of the new flats on the market to be sold as resale flats at market prices. The response has been good and we will be considering doing more of this.

Mr Wee Siew Kim asked if we could allow older singles to buy flats directly from the HDB. I think what Mr Wee is really asking is that we allow singles to buy new flats at the same subsidised prices as families. Am I correct?

Mr Wee Siew Kim: Yes.

Mr Mah Bow Tan: Well, let me ask again: is this fair? Should we be giving the same level of subsidy to the singles as we do to the families? Rule 2 says, "Give more to those who need more". So, as families have more pressing housing needs, we will continue to give higher priority to families. But having said that, single Singaporeans have also contributed. I think we have to recognise that, and we are recognising that. And this is the reason why singles aged 35 and above, who have not enjoyed any housing subsidy, can get a CPF housing grant of $11,000 to help them to purchase HDB flats. So, with this, they are able to either purchase a resale flat or, if they want to, they can actually purchase some of the new 5-room and Executive apartments that were recently put on the market at market prices.

As I said, this was a pilot project. We sold about 100 of them in this way. Twenty of them, or 20%, were sold to singles using the housing grant. So, this is another way for us to recognise the contribution of singles, but calibrating our subsidies in such a way that we do not have parity with the families.

Let me now touch on an issue which many Members of the House have

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brought up. They have asked for more assistance to be given to those who cannot service their mortgage loans and to facilitate downgrading, including elderly households who wish to downgrade for life-cycle reasons. I think Members of this House know that those who need assistance to tide them through temporary financial difficulties can get various financial assistance measures from HDB. There is a whole range of them. But just to name a few, HDB will allow the lessees to reduce or defer their loan instalments, extend the loan repayment period, or allow the payment of mortgage arrears by instalments.

Dr John Chen cited a case where the owners could not include their children as co-lessees to help service the mortgage loan because they did not have the cash to redeem the outstanding loan. I must thank Dr John Chen for making such a long speech, so that I can make an even longer one!

I have come across Dr John Chen's case in my own constituency, and I believe many other Members have too. The issue arises because it is important for HDB to now impose credit assessment on all its mortgagors. In other words, just like any commercial banks, for financial prudency reasons, HDB cannot simply give out a loan without looking into the ability of the family to repay that loan or without looking into or assessing the value of the flat which that loan is held against. It is simply unwise to do so. Indeed, some of the problems that these families face are because they were able to get loans that were higher than what they could prudently afford. Dr John Chen asks why do we need to impose a transfer of ownership just because we want to make the daughter a co-owner of the flat? The answer is because there are certain legal requirements that need to be met. For example, if you are using your CPF funds either as a lump-sum payment or for repayments, CPF Board requires

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that you become a legal owner or part-owner of the flat, and that requires you to make a legal transfer.

Why do we talk about a new loan? Why are we not giving the same loan as before? It could be because the value of the flat has fallen. As a result of the fall in the equity value of the flat, the new loan, which cannot exceed 90% of the valuation of the flat, is less than what the old loan was. Or it could simply be because the expenditure patterns or the incomes of the family are not sufficient to support the old loan. And this is the problem in the first place, ie, because the family was not able to service the old loan, that is why they came to see Dr John Chen at his meet-the-people session, and that is the reason why we are now looking at different ways to help. But the best way to help them may not necessarily be the way that they want us to help them.

One possibility could be for the family to sell off their flat, buy a smaller flat that is within their means. If the family wants to do that, HDB may be able to give them a smaller loan. Contrary to what Dr John Chen said - that the HDB sent a letter to him and said, "No, this is the only way out." - in most HDB letters, there is always a clause that says, "Can you please come and see us and we will discuss your problem with you?" I do not think any financial institution in Singapore is as reasonable as that. But, as a result of this discussion and the counselling that takes place, ways and means of helping the buyer can be found. The intention is to find a way out for such people but, as I said, the solution may not be the one that they insist upon. I think therein lies the problem in many cases. If they are able or willing to make some adjustments or sacrifices, I am sure we will be able to find a solution. Anyway, for this particular case, I will ask HDB to follow up with the family concerned.

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I recognise that, in some cases, where the flat owners are in severe financial hardship, for example, they have been retrenched or suffer a substantial pay cut, it may actually be better for them to either move to a smaller flat or even to a rental flat to help these households. Members have made many suggestions, eg, build smaller flats, review the HDB resale levy, provide additional HDB concessionary loans and more subsidised HDB rental flats, etc. I have already dealt with the building of 2-room flats earlier in my speech. Let me now address the other suggestions.

4.15 pm

First, resale levy. The rationale of the resale levy policy is simple. Our housing subsidies are limited. Our housing subsidies do not stop at one. To encourage mobility, we provide a second subsidy because we want to achieve a social good. But to maintain a fair allocation of public housing subsidies, we have to reduce the second subsidy, and this is where the resale levy plays a part. This is why HDB is able to give priority to first-timers who have more urgent housing needs.

The current levy system is such that the levy is computed as a percentage of the selling price of the first subsidised flat. For example, if you own a 2-room flat, the levy is 15% of the selling price of the 2-room flat; 20% for a 3-room flat; and 25% for 5-room and larger flats. This graded resale levy means that lessees in smaller flats, if they do their sums, will find that it is still worthwhile to move to a larger flat. Let me also say that those who do not buy a second subsidised flat from HDB need not pay any resale levy. They just keep the proceeds from the sale of their flat and all the profits thereof.

Many MPs have fed back to me that the resale levy policy is not quite fair in

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many ways. One of the criticisms is that, given its objective of reducing the subsidy that second-timers enjoy on their second subsidised flat, why do we peg the levy to the resale price of the first subsidised flat?

We have reviewed the policy. We have taken into account all the feedback. Our conclusion is that the policy is still relevant. However, we will fine-tune the policy by setting the levy payable as a fixed quantum of between $15,000 and $50,000, based on the flat type of the first subsidised flat. Under the new policy, someone whose first subsidised flat is a 2-room flat, will pay a resale levy of $15,000. Those whose first subsidised flat is a 3-room, will pay a resale levy of $30,000; 4-room, $40,000; 5-room, $45,000; and Executive flat, $50,000 respectively, when they purchase a second subsidised flat. What all this means is that if you work it all out, in nearly all cases, second-timers will now pay less in resale levy under the new system.

To illustrate, if you sell a 5-room flat today, roughly at around $300,000, you would attract a resale levy of $75,000 under the current system, ie, 25%. Under the new system, you will pay a flat rate of $45,000, in other words, you would be paying $30,000 less. A 4-room flat, which is sold at $230,000, would translate into a saving of about $12,000, in other words, about $52,000 under the old system and $40,000 under the new system. A 3-room flat sold at $180,000 would translate into a saving of $6,000, because it is $36,000 under the old system and $30,000 under the new system. These are all ballpark figures. But I wanted to illustrate that with the new levy system, there would be significant savings. And also, as the quantum of the levy is fixed, it will give greater certainty to existing flat lessees who are deciding whether or not they want to move to a second subsidised flat.

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The revised resale levy policy will apply to future cases, in other words, those who have not yet sold their first flat and who have not yet bought their second subsidised flat. The cut-off date is today. As with all Government policy changes, the new resale levy policy will not apply retrospectively, in other words, those who have already sold their first subsidised flat but have not yet purchased their second subsidised flat. These people have signed an undertaking when they sold their first flat. It may have been many years ago. They signed an undertaking to say that they would pay a levy under the old policy when and if they buy a second subsidised flat. Again, I will ask HDB to look at each and every case of appeal if it comes in, exercise due flexibility and consider applying the new policy on a case-by-case basis to those in financial hardship.

Sir, let me now talk about HDB concessionary loans. Members have asked HDB to be more generous in providing additional HDB concessionary loans to downgraders. We have a policy that we will provide every household with at least one HDB concessionary loan. But for those who subsequently purchase a larger flat, we will facilitate their upgrading by providing them with a second concessionary loan. Why do we do this? Because we believe that social mobility is an important objective. We believe that for somebody who has moved into, say, a 2-room flat, it is important for him to hope that, one day, sooner or later, or when his family size grows or when his income improves, he will be moving into a 3-room or 4-room flat, or if the family does very well, a 5-room flat or even larger. I think this is an important objective and one that we will encourage. That is the reason why we are providing them with a second concessionary loan.

Members asked what about those who want to move to a smaller flat. Usually, owners who have sold off their first flat and want to move to a smaller flat would

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have substantial proceeds from the sale of their first flats. I know there are cases that this does not happen. But usually, this is the situation. And they can use these proceeds to finance the purchase of the smaller flat. So, as a policy, we will require those who need a loan to purchase a smaller flat to obtain a bank loan. Such an approach has allowed us to focus our attention on those who need more assistance, in this case, the first-timer households as well as the upgraders. I must emphasise, based on the global picture that HDB provides me, most households do not have any difficulty obtaining bank loans. But I wish to assure Members that MND and HDB will examine every appeal on its own merits and we will be as flexible as possible in cases of genuine hardship.

Next, I move on to market rate loans. Mr Ahmad Khalis asked for some figures, an update on bank origination and the number of flats that the banks have repossessed.

Since January 2003, when we started bank origination, there have been about 70,000 bank loan cases for HDB flats. Most of these are, of course, for the purchase of resale flats because for the new flats, they can take an HDB loan. But there are some people who take a bank loan, even though they are eligible for an HDB loan, a very small percentage, because they may have a better package with the banks. As at 31st January 2006, the mortgagee sales of 190 flats by banks have been completed or are pending completion. I think you will agree with me that the number, at the moment, is not significant. It is less than 0.3% of the total bank loan cases. But, nevertheless, we will continue to closely monitor the situation and continue to do counselling, advise and exhort flat buyers to always exercise care when they purchase a flat using bank loans, and to be very prudent in the kind of loan that they ask from the banks.

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Mr Ahmad Khalis also asked what can we do to assist those whose flats have been repossessed or are facing repossession. First, we have to accept that banks and financial institutions have their own rules and regulations and practices concerning how they deal with potential defaulters. But I know that they also have their own financial assistance measures to help mortgagors who are in difficulties. They tell me that they are not in a hurry to repossess flats. They would, first of all, try to work out a scheme of arrangement with the flat owners to try and make sure that they are able to solve their predicament in some way. I believe there have been some cases where they have worked out a satisfactory arrangement. So HDB flat-owners who are facing difficulties keeping up with their bank payments should, first of all, approach their banks for help. HDB will not and cannot intervene in such cases because it is a private matter between the borrowers and the banks.

For those whose flats have been repossessed by their banks, the HDB Branch Office will provide advice and assistance, if necessary. Of course, there are many options for the ex-lessees. And here, I want to emphasise again that every time they come and look to HDB or Government for assistance, they should, first of all, look at their own personal situation, at families, relatives or friends, to see whether they can get help in that direction as well. If they cannot, they will have to either rent a flat from the open market, buy a smaller flat or failing which, if there are extenuating circumstances, they may come to HDB to request for HDB rental flats. So there are many avenues for such people to try and get help. HDB is not the first avenue and, of course, it should not be the last. Prof. Chin mentioned some of these areas of help, whether it is the CDCs, VWOs or various Government agencies. He also

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asked for a one-stop centre for all these. I thought this is what the MPS is for. They come to us and we are supposed to find an answer for them. We will continue to find various means to help them, but I urge Prof. Chin to exercise his ingenuity and to try and help his constituents. And if he still cannot, he can always write to me.

Let me reiterate once again - I do not want to sound like a stuck record - but I really would like to reiterate that buying an HDB flat is a long-term commitment. It is a financial commitment that all flat buyers need to be aware of. They have to exercise financial prudence and they should only consider buying a flat if it is within their means. They must take into account their household income and possible changes to their household income or even possible changes to the mortgage loan rates. Having taken all these into account, if they can still proceed to buy a flat and take advantage of our various schemes, then we would encourage them to do so.

Sir, let me now move on to another hot topic of Members - HDB rental flats. Many Members have spoken - Dr Lily Neo, Mr Ang Mong Seng, Mdm Cynthia Phua and Mr Steve Chia too. Dr Lily Neo suggested that HDB build smaller rental flats so that elderly singles can rent a flat on their own. Mr Ang Mong Seng asked if we can offer converted 2-room flats as rental flats and also to waive the 30-month debarment for those who wish to rent from HDB. Mdm Cynthia Phua wanted to know if we have enough rental flats. Mr Steve Chia suggested that we build more rental flats. Back to basics again.

4.30 pm

Our public housing policy is based on encouraging home ownership. That is the reason why we price our flats such

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that the majority, about 90% of Singaporeans, can own their flats. But I think we all know that not everybody can afford to own their homes. We recognise that. And that is the reason why, to complement the Home Ownership Scheme, we have a Public Rental Scheme. Under this Public Rental Scheme we will provide 1- and 2-room rental flats to meet the housing needs of low-income Singaporean households, who cannot afford home ownership flats. The rentals under the Public Rental Scheme are heavily subsidised. For example, a subsidised 2-room flat is rented to low-income families for about $60. The market rental is about $480. If you compute this over a 10-year timeframe, you are talking about a total subsidy of over $40,000. What does this really mean? This means that HDB rental flats are another form of public housing subsidy. They have to be funded from the same public housing budget that we use to provide subsidies for sold flats, upgrading and estate renewal programmes, and so on. That is why we have very strict eligibility criteria for public rental scheme applicants, criteria such as ownership of private property or ownership of property earlier, family nucleus, income, citizenship, and so on. This way, we ensure that rental subsidies are given to those who really need them and who have not enjoyed their fair share of housing subsidies.

[Mr Deputy Speaker (Mr Chew Heng Ching) in the Chair]: 4.33 pm

Let me assure Members that HDB has enough rental flats to meet the housing needs of low-income households who cannot afford to own a flat. But this is provided we maintain very strict eligibility criteria and guard against the entrenchment of those who can afford to own a flat but who decide to stay in a rental flat

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because it is so cheap. We will continue to require singles wishing to rent a flat from HDB to share one with another eligible single. It is difficult for the singles to do so and, there have been persistent requests from many Members why we cannot let them live alone. If every single has his own flat, we will not have enough rental flats. The demand for rental flat is going to double immediately. We will require those who have cashed out of their flats to observe a 30-month debarment period before they can be considered for a rental flat. If we do not have the 30-month debarment, again I see a flood of applicants coming for rental flats straightaway after they have sold their flats.

I would also be very careful about making rental flats easily available for parents who have been displaced by their children. I do not think it is a good idea. Already, we are seeing many cases at our MPS of elderly residents coming to us and saying that they have been kicked out of their flats by their children. Much as we sympathise with them, if we have a policy where we make rental flats available for this group, I think we are going to end up with a greater social problem because we are going to encourage more children to chase their parents out of their homes. But, as always, there will be cases where they are in genuine financial hardship and this is why we take this approach of having a flexible implementation of some of our rules, even as we make those rules carefully and properly, in order to make sure that public housing subsidies are well allocated. So, in this case, as in many other cases, I will ask HDB to look at cases flexibly and where the merits of the case warrant, we will look at it favourably.

Let me emphasise that even as we provide rental flats to low-income families, we will continue to assist and encourage them to buy their own flats when they are

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financially ready because this will enable them to feel that they too have a stake in this country and that they have not been left behind by our economic progress. And this is why we have introduced the additional CPF housing grant and why we are building 2-room flats.

Finally, two last issues I want to address. The first one is reverse mortgage. Dr Wang Kai Yuen talked about the purpose of having a scheme such as the reverse mortgage scheme. He calls this a way to help the empty nester retiree households. Many MPs and many people have lamented that we suffer from this asset-rich cash-poor syndrome. I submit that it is better for us to have an asset-rich cash-poor syndrome than to have an asset-poor cash-poor syndrome. With an asset-rich cash-poor syndrome, we have a happy problem to solve - how we can help people convert their asset to cash at the right time when the cash is needed. Mr Chay Wai Chuen rightly pointed out that the flat is a store of wealth.

Recently, we released some DOS figures to show that, on the average, the net value of a flat is something like $138,000, and that is not a small sum of money. If we can find a way to convert that into cash in some form, then we would have provided a way for the lessee to live his retirement years in comfort. And we have done this over the years. We have put in place a wide range of options to help the elderly monetise their flats. We have built studio apartments which would allow the elderly lessees to sell their existing flat, buy a studio apartment and live comfortably and use the balance proceeds to purchase an annuity plan or other financial products. We have liberalised the conditions for the purchase of studio apartments last year. Studio apartment buyers need not top up their Medisave accounts. They can also

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use their CPF savings to pay for the studio apartment after they have set aside cash for the Minimum Sum. Elderly lessees can also rent out a room or they can rent out the entire flat, if they have another place to go to, with their children, friends or whatever. The market rate for renting a room is about $250-$500, depending on location. Today, there are more than 500,000 lessees who are eligible to sublet their whole flats.

But what about the reverse mortgage? Mr Othman Haron Eusofe asked for an update on the status of our discussions with industry players on reverse mortgage. I am happy to inform him that we have been in touch with many industry players and, in fact, one financial institution is ready to offer such a scheme, and that is NTUC Income. I will leave it to NTUC Income to release the details of the scheme. I welcome other banks and financial institutions to also offer reverse mortgage schemes for HDB flats, so that our lessees can have more choices.

As these are financial schemes, they should be offered on commercial terms. The Government will not provide any financial assistance or guarantees to providers of such schemes. This does not mean it will not work. Yes, Mr Chay explained to us that in the US, the government or institutions like the Housing Urban Development Corporation (HUD) provide financial help. But I also know that in the UK, there are no financial assistance schemes given but the reverse mortgage has taken off. I am not sure whether the reverse mortgage scheme in Singapore will be very popular but this is another option which we can offer to our lessees. This is in line with the recommendations of both the Ministerial Committee on Low Wage Workers as well as the Committee on Ageing Issues.

We will work with industry players to facilitate the provision of such schemes,

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so that elderly HDB lessees will have more options to monetise their flats to enhance their retirement adequacy. Whether HDB lessees will sign up for the reverse mortgage schemes is an individual decision that only they can take and, of course, they will have to take into account the terms and conditions that are offered and look at other alternatives that they may have.

Sir, finally, let me address Dr Wang Kai Yuen's comment on the Ethnic Integration Policy (EIP). Recently, I answered the Question in Parliament - I think it was Dr Amy Khor who asked the question - about the Ethnic Integration Policy. But I think it is worthwhile for me to reiterate some of the key points today because it is an important policy. It is an important pillar of our policy to maintain social stability and, yet it is one that the Workers' Party says should be scrapped because they feel that it is no longer necessary. When I answered the Question in Parliament I was hoping that Mr Low Thia Khiang would be around so that he could respond to some of the questions that I had. I see that he is still not around in this House as we are debating this issue. I am wondering whether the Workers' Party is having second thoughts about this part of their manifesto but, anyway, we shall see.

Let me state, first of all, very categorically that the EIP is still as relevant and necessary today as when it was first introduced in 1989. In fact, I would argue that at a time when our multi-racial harmony and social stability is under challenge, the EIP is even more critical. It has been effective in maintaining the ethnic balance in our HDB estates. Over the years, it has helped to lower ethnic concentrations in towns which have high concentrations of a particular race, whether it is Chinese in Sengkang or Malays in Bedok. Even with the EIP, 41, or 25%, of the HDB

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neighbourhoods have hit the EIP limits. So, I have no doubt that the ethnic concentrations would have been higher if there had been no EIP to place a cap on ethnic proportions. This would have serious repercussions on the multi-racial flavour of our housing estates, schools, shops, and so on.

The second point I would like to reiterate is that we apply the EIP policy consistently across all ethnic groups. For example, there are Chinese households in Tampines, my constituency, where the Malay limit has been reached, and the Chinese households are not able to sell their flats to a Malay household. Similarly, there are Chinese households in Whampoa/Kallang who cannot sell their flats to an Indian household, or Malay households in Bishan who cannot sell their flats to a Chinese household, because doing so will exceed the respective EIP ethnic limits. So I want to assure Members that we will review the EIP limits from time to time to ensure that they too reflect the ethnic distribution of our population.

The third point I would like to make is that most flat-owners who wish to sell their flats are able to do so without any difficulties, despite the EIP. In other words, the magnitude of the problem is not as big as many would have us believe. Less than 1% of the total resale applications received by HDB each year were rejected due to the EIP. There are about 30,000-35,000 resale transactions a year. Last year, we had about 300 appeals for sales rejected due to the EIP. So, with this large number of resale transactions, sellers who are realistic in their asking price should be able to find buyers from the eligible ethnic groups.

Dr Wang Kai Yuen asked whether we can do anything to minimise the problems faced by the people who are affected by the EIP. This is a very relevant question but, as I mentioned earlier, our experience

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is that the number of people who are affected, who are really truly unable to sell their flats, is not a very large proportion, about 1% of the homeowners, and even those who are affected by the EIP are generally able to find buyers for their flats, even though they may take a longer time to complete their transactions.

As for the prices, there is no conclusive evidence that the EIP has depressed prices, causing affected owners to suffer grave losses. We look at different prices across different estates for different ethnic groups, and the prices vary considerably depending on a whole host of factors. Some of these factors, obviously apart from market conditions, include factors like location, age, condition of the flat, facing of the flat, timing of the sale, urgency of the sale, and so on. So, when a home owner is not able to sell a flat at his or her expected price, it is due to many factors, apart from the EIP.

4.45 pm

Sir, the EIP does impose a constraint on some sellers as well as on buyers. As a result, they need a longer time to buy or sell. We will continue to review the policy to try to minimise the impact of the policy, but the policy must remain. By maintaining a multi-racial environment in our housing estates - in our schools, shops, playgrounds - we maintain social stability, racial harmony and religious tolerance, and we keep Singapore safe, secure and prosperous for all races.

Dr Amy Khor Lean Suan: Sir, I would like to seek a point of clarification. Firstly, on the resale levy, I note that the new mode of computation is much clearer. It gives more certainty. But it still does not seem very logical or equitable. Because the rationale for imposing the resale levy is really to reduce the subsidy enjoyed on the second flat. I

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want to know why HDB has not gone on the route of imputing the resale levy on the second flat, which was actually done previously. Because this will also take into account the fact that the purchaser may actually be buying a bigger or smaller second flat, and he may be enjoying a different quantum of subsidy, but HDB is pegging it on the first purchase. I would like to ask the Minister why is it that HDB has decided not to peg it against the second flat but to the first flat.

Second point of clarification is regarding the concessionary loan. I would think that if we do not give the concessionary loan to first-time downgraders, are we not penalising them? Because many of them may be downgrading basically because of their social needs, or to reduce their financial burden. Although they are able to, they may actually be struggling to pay and they would just like to have a small flat so that the debt servicing is much more manageable. Why can we not just equalise and say that everybody who has a second bite of the cherry would get a concessionary loan? Otherwise, we might be sending conflicting signals, because we are now preaching prudence and, unwittingly, we may actually be sending the signal that if they upgrade, they can get a second bite of the cherry. But when they downgrade, they cannot.

My third point of clarification relates to the implicit or market subsidy enjoyed by first-time buyers of new flats purchased directly from HDB. Sir, the Minister said that this subsidy, if I am not mistaken, is much more than the housing grant given to first-time buyers of resale and DBSS flats. I would like to ask the Minister to clarify how exactly this implicit subsidy is actually arrived at. How are the new HDB flats priced such that the buyer will enjoy this significant subsidy? Given that new flats actually have a lot more restrictions than resale flats, by right, they should already be priced lower

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than resale flats, all things being equal. After that, is there a further discount, which is presumably the implicit subsidy, given to these new flats? If it is so - and this is much more than the housing grant that is given - I would like to ask the Minister: does it mean that we are actually penalising first-time buyers of resale and DBSS flats, simply because they choose to buy resale or DBSS flats?

The Chairman: May I remind Members to keep their clarifications short?

Mdm Cynthia Phua: Sir, the supply of 2-room flats is still my concern. Because what the Minister has quoted is that there will be only 100 units in the first year and, most probably, 90 units in the second year, because it will take about two years for them to be built. So, we are only talking about 200 flats. We have 84 MPs. If each MP has two cases a month, we are talking about 168 cases a month. Can the Minister tell us, for the next five years, what is the projection of the supply of 2-room flats?

Dr John Chen Seow Phun: Sir, I thank the Minister for asking the HDB to relook at the case I brought up, but I hope that he would not rule out providing the same loan amount to the family. I understand the need for credit assessment policy, and so on. But I think the policy should not be applied blindly. In this case, it is not a case of purchasing a new flat, but it is the same old flat. In fact, if it is a bank and if the bank assesses that the property value has dropped and if the houseowner is prepared to provide another co-owner to chip in and contribute to the loan repayment, I think the bank would welcome it. It will be an improvement to the quality of the loan.

The Chairman: What is your clarification, Dr Chen?

Dr John Chen Seow Phun: My point is that the Minister should reconsider this

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case and exercise flexibility, so that the family will be helped. Otherwise, if the family was asked to sell their flat, it could be negative equity and the problem would come back to HDB. And HDB would be owed money and I do not think that is good for HDB as well.

Mr Mah Bow Tan: Sir, I always like to start off with the last one first, as that is the one that I remember best. So I will respond to Dr John Chen first. He asked for HDB to be flexible. I have always emphasised to Members of this House that HDB is very flexible, but I cannot ask HDB to break the rules. In this particular case, if the total household income is insufficient to service the mortgage instalments on the existing loan, then I think it is really unwise - not just for HDB but also for the family - to take this loan. But I think the best way to resolve this is really for me to look at the specific case, go through the numbers with Dr John Chen and let us see whether we can come up with an amicable solution. But I would like to emphasise that the credit assessment policy is a sound policy. They are policies that would, in fact, benefit his resident in this particular case.

Mdm Cynthia Phua asked about the supply and demand for 2-room flats. Apart from the converted flats that we are going to do in the pilot project, we will also be doing some BTO projects in Sengkang for the 2-room flats. Altogether, there will be at least 150-160 flats. Will that be enough? We should wait for the response to these flats before we can gauge. It is really difficult for us at this stage to assess what is the true demand for such flats, because we have only had about 6,000 of these flats in the market and not many people are familiar with such flats. Only after we have priced them and put them on the market, and people are able to see what they are buying, then we will be able to assess the true demand for such flats. So, I would urge the Member to be a little bit patient.

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Perhaps I should invite her to come and have a look at these flats as well, just to see what she thinks, whether they are going to be popular or not.

Dr Amy Khor asked three questions. First of all, why do we not impose a premium on the second flat, instead of imposing the levy which is tied to the first flat type. When we looked at the resale levy policy, there were many considerations, not least of which was that we wanted a policy that is simple to administer, easy to understand and provide some certainty to the buyer. That is the reason why we fixed the levy amount.

If we put it as a premium on the second flat, not only do we have to depend on the future selling price of the second flat, but the levy payable on the second flat would also vary according to the flat type. It would range widely, depending on prices of the second flat. So it really comes back to this issue of uncertainty again. That is why we felt that it is better for us to fix the quantum. Of course, it makes sense today. It may not make sense in the future. But having fixed the quantum, as with other HDB grants, for example, depending on the situation, we may vary the quantum, up or down as the case may be.

The second clarification she sought was on concessionary loans. Why do we give concessionary loans for upgraders and not downgraders? As I explained, first of all, there is a public good. There is a social objective that we want to encourage, which is upgrading. We want people to be socially mobile to move up in life and the house is one way for them to demonstrate this.

Why do we not give it to downgraders? Again, it is because, for downgraders, monetising of their first flat

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which gives them a certain sum of money in hand will actually allow them to buy a smaller flat without any difficulty. This has happened in many cases. But because of the recent drop in HDB flat prices, we have come across many cases where even the downgraders are not able to have any cash in hand, because some of the time, the value of the flat is less than the loan. In such cases, HDB has looked at their appeals favourably. In most, if not all cases, they have said, yes. One of the criteria for the HDB to look at the second concessionary loan for downgraders is really to see whether there is any cash in hand after they have sold their flats. If the Member has any case where the person is able to show that he is totally wiped out by the sale, HDB would look at it favourably. So, it is not all no for all downgraders. There are many downgraders who are actually not in any difficulty at all. There are people who are downgrading from a 5-room to a 3-room flat. It is downsizing, right sizing, or whatever you call it, there is no shame involved. You are at the stage of your life where you do not really need a big flat. You want to move to a small flat. But that does not mean that the Government has an obligation to give you a second concessionary loan, because the proceeds from your first flat is sufficient to buy the second flat. That is the reason why, as a policy, we are not prepared to give a concessionary loan for the downgraders, but we are prepared to be very flexible and generous on a case-by-case basis.

The third point Dr Amy Khor raised was this issue about implicit subsidies. How do we price our flats? The most important criterion in pricing of new HDB flats is affordability. We track affordability very closely. We track what are the various household incomes at various percentiles. We also track the market prices. We ensure that the price of a new flat is always at a discount to the market price of that similar flat, as far as possible. She knows, as a valuer, that it

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is not possible to have everything exactly the same. But as far as is possible, as far as the valuers can advise, we try to price the new flat at a subsidy to market price of a comparable flat.

What is the amount of this subsidy? It varies from place to place. It varies from time to time. The important criterion, as I said, is to ensure that there is affordability at various price points and at various flat types. And that is the reason why it is not possible for me to name a certain amount as the subsidy of the flat.

5.00 pm

As for the difference between a new flat and a resale flat, yes, they are different. Why do people buy a resale flat if they perceive that a new flat gives them better value? It is really up to the individual. Some people would prefer to live in a certain area, near to their parents. Some prefer to live near to their workplace. Some cannot afford to wait. For such people, the resale flat is a better option. Those who can afford to wait, those who are prepared to wait for their flat in the location of their choice and they feel that it is a better option for them, go for a new flat. Then, again, there are some people who say, "Look, I don't want the hassle of renovating my flat. I want to buy something that I can see and move in straightaway." Then you go for a resale flat. There are many, many different reasons why people choose one over the other. At this particular point in time, there are more or less the same number of people who buy a resale flat as buy a new flat, plus or minus 10%.

I believe I have answered the Members' clarifications.

The Chairman: Mdm Cynthia Phua, please make it short because we are running out of time.

Mdm Cynthia Phua: Thank you for giving me this opportunity. The Minister

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has mentioned about 150 2-room flats for the next two years. Does it include studio apartments because I have actually asked for housing for the elderly? This is not mentioned at all. We need to give hope to our elderly as well.

Mr Mah Bow Tan: No, it does not include studio apartments. Studio apartments are a separate building programme. Yes, we are building more studio apartments as well to cater to the needs of the elderly. But it is not counted in the 160.

Mdm Cynthia Phua: What is the number?

Mr Mah Bow Tan: We have studio apartments that are available currently, about 100 over units which have just been built. There will be some more being built under BTO programme, another few hundred units in various parts of Singapore.

Mdm Cynthia Phua: What is the overall number?

Mr Mah Bow Tan: All in all, less than 500 at this moment. But, again, as and when we build new apartments either to house displaced SERS lessees or new BTO contracts, we will consider putting studio apartments in them as well.

The Chairman: Mdm Halimah, make it short.

Mdm Halimah Yacob: Sir, I just want to seek a clarification from the Minister on the housing grant eligibility criteria for the low-wage workers, where the Minister said they must have worked continuously for two years. My question is this: you can have a person who has worked for a few years and he loses his job and then he gets a job for a few months, and he wants to apply for the housing grant. But he is not eligible because he is not working continuously. But it is not through any fault of his because he has

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been retrenched. But he already has got a job, which he has just worked for a few months. Would the Ministry consider some flexibility for such low-wage workers so that they can qualify? Otherwise, they will have to start from zero base all over again, which is too harsh and too rigid for them.

Mr Mah Bow Tan: I would like to assure Mdm Halimah that we will certainly be very sympathetic and understanding for cases where there is a break in the two-year requirement as a result of, say, retrenchment or some problems in the family. But why we have this two-year requirement is because we want to make sure that the family has some ability to service the loan that is going to come with the purchase of the house. So we think that the two-year employment history is a reasonable and fair indication of the employability of that particular family. But if there is evidence of employability and if they do not meet the two-year requirement for, as I said, some unforeseen circumstances, we would certainly take that into account.

The Chairman: One last clarification, please. Mr Wee Siew Kim.

Mr Wee Siew Kim: I would like to make a clarification on the point of displaced parents. I support the pro-family policy. But in cases where the parents are already thrown out, I hope the Minister could find some accommodation first and later use the existing legislative or other instruments to get back at the irresponsible children.

Mr Mah Bow Tan: Sir, if the Member is asking me for a policy on displaced parents, my position is that we will not provide housing for displaced parents as a policy. But if he is asking me about a specific case that he has, then I think we will certainly look at it.

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The Chairman: Dr Teo Ho Pin, can you move to your next cut?

HDB Upgrading Programme

Dr Teo Ho Pin (Holland-Bukit Panjang): Sir, the HDB upgrading programmes, namely, the Main Upgrading Programme (MUP), the Interim Upgrading Programme (IUP) and Lift Upgrading Programme (LUP) have benefited many Singaporeans. Many older HDB estates have been rejuvenated with better amenities and improved living environment. Feedback from residents has been positive and many Singaporeans are urging the Government to expedite the upgrading programmes, in particular the Lift Upgrading Programme. Sir, I wish to ask the Ministry the following questions: (1) Are there plans to further expedite the LUP and IUP Plus Programmes? (2) Can the Ministry revise the selection criteria for IUP Plus Programme to include blocks completed between 1981 and 1990? (3) Can the HDB remove the $30,000 cap for the IUP Programme for each benefiting unit so that more flat owners can benefit from the programme?

Lift Upgrading Programme

Dr Amy Khor Lean Suan: Sir, it was announced that using the new technology for lift upgrading, the Government will save $1 billion on its Lift Upgrading Programme. Nonetheless, the Minister had noted that it is still too costly to extend the lift upgrading to the 190 blocks that are ineligible under the existing cost regime. Sir, I hope that the usual cost-benefit equation underlying this "nay" will take into account non-economic factors.

Sir, due to our ageing demographic profile and increasing expectations of Singaporeans, access to lifts at every floor is now considered a "must have" for everyday HDB living, and not an optional item. I would like to urge the Minister to consider extending lift upgrading to these

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190 blocks. Since there is a $1 billion cost savings arising from the new technology, a small sum could be used to cross subsidise the Lift Upgrading Programme for these blocks. Otherwise, these blocks are destined to suffer from lack of resale demand, thus consigning them to a bleak future, unless, of course, HDB carries out its SERS programme.

Dr Tan Cheng Bock (Ayer Rajah): Our ageing population needs a barrier-free environment to move about freely. So we build ramps, overhead bridges and escalators. These are all very fine. But for the old people living in high-rise buildings, they need to come down and they need the lifts, or else they will be house-bound. But in old housing estates, the lifts are rather old. They break down frequently and they do not stop at all levels. These old housing estates are actually housing all our old Singaporeans. For example, in my Teban estate, it is an old estate. The children have left them. They are all on their own. Their retirement funds are very low and they have hardly any cash. So we want them to pay for the lift upgrading. I feel that we must relook at this programme because they have made a lot of contributions to this nation. These are people who actually stood by us in the early years. Now, they have not much cash and they have been asked to make contributions. So I am asking the Minister to look at this programme again and see how best we can tailor the Lift Upgrading Programme to suit these people. I know we have new lift design, and so on and see whether, with this new design, we can cut down the cost and give them a better programme so that they do not have to contribute so much. Of course, if we can give them free as a gesture, that they have made so much contributions, it will be much better.

Mr Ang Mong Seng: (In Mandarin) : First of all, I would like to thank Minister Mah Bow Tan for accepting my

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suggestion at last year's Budget debate for HDB to adopt a new technology, the so-called machine-roomless lift technology, for the HDB Lift Upgrading Programme.

At present, this new technology is already used for some low-rise flats. The use of this technology reduces the installation time by one third and lowers the construction cost by some 20%. This is because the machine-roomless lifts do not need to have a machine room constructed on the roof top, and also lighter metal could be used to construct the lift well, instead of reinforced concrete. This will reduce installation time by about one-third. It also saves construction cost. As such, the residents will save on their upgrading cost and enjoy a brand new lift facility sooner than expected.

In other countries, this technology is being used on 18-storey buildings. The Minister has said that HDB will use the new technology in other flats in Singapore. I urge HDB to make full use of this new technology so that the Lift Upgrading Programme could be completed faster. Since it is a 20% saving on the cost, I would like to ask whether the Minister would bring forward the upgrading of all the lifts from 10 years to five years.

May I also know how many polling exercises have been conducted for the residents of the low-rise flats to decide whether or not they want to have lift upgrading and what has been the response so far?

Dr Tan Boon Wan: Sir, with the ageing of our older estates, more residents are asking for the Lift Upgrading Programme with greater urgency. I am glad that since the programme was started, many blocks of flats have their lifts upgraded. But to some, this is not soon enough. Last evening, an old lady came to my meet-the-people session (MPS) and she was

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desperate to have her lift upgraded in her block. She only lives in the second floor. I asked her why. She said that she has written to HDB, and HDB has given her the usual explanation, "You have got to wait and queue for your turn." But she said that her husband has a stroke and he is now immobile, and it is very difficult for her to bring her husband down, just even one floor. He has got to go for medical examination. So she said that she would like to have it done as quickly as possible. I promised her that I will write to the Minister to convey her concern and request.

I am therefore glad to hear that a less costly method to the programme has been found. I would therefore like to ask the Minister if he could speed up the Lift Upgrading Programme even faster. This programme comes on its own or together with the Interim Upgrading Programme and the Main Upgrading Programme. I would therefore like to ask the Minister when the list of eligible blocks of flats for these two latter programmes would be updated.

Mr Mah Bow Tan: Sir, last year, I informed Members of the various measures that MND is taking to complete the Lift Upgrading Programme (LUP) in 10 years' time. Various Members have now raised questions relating to LUP. So let me give them an update on the progress that we have made over the past year.

Firstly, we have stepped up the pace of upgrading. We have selected 64 precincts for upgrading in FY05 which is a significant increase over the 46 precincts in FY04 and 24 precincts in FY03. As an indication of the progress that we have made, there are about 2,500 eligible blocks that are awaiting selection for the LUP, compared to more than 3,000 blocks a year ago. So we have completed 500 blocks in one year. Of the 64

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precincts selected in FY05, six were for MUP, 15 were for IUP Plus and 43 for LUP. To make better use of our upgrading budget, we are selecting more precincts for the LUP and IUP Plus each year, instead of MUP.

5.15 pm

Secondly, to stretch every LUP dollar and ensure that as many residents as possible can benefit from lift upgrading, we introduced a cost cap of $30,000 per benefiting unit for the LUP. Blocks are eligible for the LUP if they do not exceed the cap. The cost cap is necessary because the cost of lift upgrading can be very expensive. Although we have managed to reduce the cost of lift upgrading, it does not mean that we have totally eliminated the cost. Even with the cost cap, about 90% of blocks will benefit from the LUP.

Mr Ang Mong Seng asked about low-rise blocks. Lift upgrading has been extended to 232 low-rise blocks which have met the cost cap so far. 73 of these low-rise blocks have successfully polled for LUP. The support levels ranged from 78% to 100%. Polling for the remaining precincts will be conducted over the next few months.

The third way that we have tried to speed up the LUP programme is to give Town Councils the go-ahead to carry out their own lift upgrading works for some 100 blocks under the Town Council-Lift Upgrading Programme (TC-LUP). So, if they meet the eligibility criteria, Town Councils can also do their own lift upgrading programme in parallel with HDB's. In this way, we will speed up lift upgrading in HDB estates. The other advantage, of course, is that Town Councils will be able to schedule and prioritise their blocks according to the needs of their residents.

Sir, I am not sure about the particular block that Dr Tan Boon Wan mentioned,

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but it is worth checking to see whether it is eligible for TC-LUP, in which case, the hon. Member could actually select and do the lift upgrading for his residents even faster. He does not have to write to me.

Fourthly, as I have recently announced, HDB will be using new technologies and construction methods to save cost and time. For example, there is this new machine-roomless lifts (MRLs), not machine-less lifts, which Mr Ang Mong Seng has very vividly explained to the House just now. These are lifts where the machines and controllers are incorporated into the lift car. What is the benefit? It means that we do not need an additional room at the top and, therefore, we do not need to build a structure to hold that room. So, all in all, it means lower cost and less time, without compromising on performance, capacity and safety. Residents will pay up to 20% less for their share of the LUP costs, and they can get their lifts faster, by six months, from 33 to 27 months from the point of polling to LUP completion.

MRLs will be used for both high- and low-rise blocks, because it is technically feasible and cost-effective to do so. Around 95% of the blocks that are selected for the LUP and IUP Plus in FY05 will be able to benefit from the use of the MRLs.

We have made significant progress in the LUP. We are on track to fulfilling our promise of bringing the LUP to all eligible blocks in 10 years' time. Some Members have suggested, why not five years instead of 10 years? Sir, we need to consider the capacity of the industry but, more importantly, we need to be aware of the amount of funds that we have available for lift upgrading. I believe that 10 years is a realistic target. In fact, it is a stretched target. If Members will recall, we actually started off a few years ago to complete the LUP in 15 years. So we have actually reduced that total

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programme by one-third, to 10 years. I hope that Members will be patient. We will try and speed it up as fast as we can but, given the number of blocks that still need to be done, I think 10 years is a realistic target.

Let me now address specific comments and suggestions from Members. Dr Teo Ho Pin and Dr Tan Boon Wan asked if we could review the criteria to allow more blocks to qualify for IUP Plus. Currently, as Members know, blocks that are built between 1981 and 1986 qualify for IUP Plus. Our immediate priority is to go for LUP to bring lift upgrading to as many households as possible within the next 10 years. So blocks that are built after 1986 without lift access can also be selected for LUP. It does not mean that they get nothing. So there is really no immediate need for us to review the age criteria for the IUP Plus, which essentially covers the same works as the IUP, except for some additional precinct works.

Dr Teo also asked whether we could remove the $30,000 cap for each benefiting unit under the LUP. We introduced the cost cap because it does not make sense for us to provide lift upgrading at any cost. There is a limited budget for the LUP and we want to try and get the maximum number of LUP programmes done within this budget as possible. HDB blocks come in different shapes, sizes and configurations, and some of these configurations make it extremely difficult, technically as well as financially, for us to justify doing a retrofit. There is one block that I know of that requires 19 lift shafts. It is a very long block. Each of these lift shafts is serving four households. I think it simply does not make economic sense. The cost can be as high as $80,000 in some of these blocks. There are some very complicated blocks, segmented blocks with the voids inside and so on. We have worked out the cost at something like

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$80,000 per unit. If we take the total cost of providing that lift to that particular block and divide it by the number of units, it gives us $80,000 per unit. If the flat value is about $160,000, I do not think it makes sense for lift upgrading to proceed when the cost of lift upgrading is half the value of the flat.

So what do we do? We will continue to explore other cost-effective solutions for these blocks, including the use of new technology. I believe that we will be able to find a solution within the timeframe of the LUP. It may not necessarily be next year or the year after, but I will advise HDB to actively look at some possible solutions for them. If we just think about last year and this year, for example, the use of the MRLs has really given us quite a lot of significant savings, and those savings have allowed us to still keep the cost cap and yet expand the LUP to at least 250 more blocks, both high and low-rise.

Finally, Dr Tan Cheng Bock asked if we could give concessions to elderly households in their payment of LUP, taking into account the age of the estate, the demographics, income profile and so on. I fully understand Dr Tan's concern. For the elderly, the lift upgrading programme is probably the most important upgrading programme that they desire. That is the reason why the Government has made special efforts to ensure that payment for the lift upgrading programme is not a problem. It would ease the payments of these less well-off elderly residents in several ways. For example, they can defer payment temporarily, extend the repayment period and even defer payment until the flat is sold, in other words, do not pay the HDB anything until the flat is sold off and transferred. Members must bear in mind also that the lift upgrading programme is heavily subsidised in the first place and residents

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co-pay only a small portion of the cost. I am pleased to know that residents have appreciated the LUP and that very few residents have had problems with payment. We have had 6,400 households which have been billed for LUP thus far. 85% have fully paid up their share of the LUP cost, 15% have opted to pay by instalments, only eight households have opted to defer payment until their flats are sold, ie, eight out of 6,400. This demonstrates that the share of the LUP that residents have to pay is not really that onerous.

Sir, as our population ages and climbing up stairs becomes more difficult as the years go by, including for some of us when we go for our block visits, I would like to assure Dr Tan that we will do our utmost to make sure that our elderly residents are able to have comfortable and convenient access to their homes.

Dr Teo Ho Pin: Sir, may I ask the Minister how many units of flats are actually affected by this $30,000 cap and whether the Ministry will consider, instead of capping the cost of each benefiting unit, can we cap the subsidy instead and allow the owners to decide whether they would like to top-up to carry out the Lift Upgrading Programme?

Mr Mah Bow Tan: There are a few hundred blocks that are affected by this cost cap. Should we allow them to top up? Some of these blocks, as I explained in my reply, require something like $50,000 to $80,000 to implement the LUP. So, if the hon. Member is talking about just capping the subsidy and requiring them to pay the difference, the difference is very significant, and I am not so sure whether this will be welcomed by the residents. I think it is far better for us to keep on looking for more cost-effective solutions and to give them the lift upgrading programme without having to cost them an arm and a leg.

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HDB Shops

Mr Arthur Fong (West Coast): Sir, the retail sector in Singapore recorded a growth of 7.4% in 2005. However, we know that this growth was not experienced by many of the 15,200 HDB retailers who form the major portion of the retailers here. In fact, business prospects remain poor for this group.

Sir, the daughter of the owner of one such shop in Clementi wrote to me of her father's situation. I quote Shirley:

"A few years back, my father bought the shophouse from HDB. He had been renting the same shophouse from HDB for 20 years. A loan was taken from a commercial bank, amounting to more than $1 million. Today, the outstanding loan is still at about $800,000-plus. Monthly repayment to the bank is about $6,000. Development is slack in the area to boost up any business. My father can hardly maintain the monthly repayments to the bank. Maintaining a shop no one wants to rent is straining on the finance."

Sir, there are many reasons why there are such cases. Some of the reasons are as follows:

(1) There is an oversupply of HDB retail shops;

(2) Older towns and precincts are experiencing a hollowing out;

(3) Poor retail mix; and

(4) Shopping environment is not conducive.

The Restructuring Programme for Shops (RPS) was announced by the Minister in March 2005 to assist HDB shop tenants located in areas where there is an oversupply of shops and where the business is poor to retire from the business or to restructure and upgrade their business operations. A pilot was

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carried out last year involving seven areas. In the case of Shirley's father, I fear the RPS will fall short of helping them. The clock is ticking and I think the reality that hon. Members talked about just now will befall on this family. Would the Minister please provide an update on the RPS and share the next steps planned by the Ministry to help the HDB retailers to improve their business?

Mr Wee Siew Kim: Sir, I will start with a request. I seek the Minister's consideration to review the current system of renting out stalls and shops in the HDB heartlands. The current system of imposing a fixed rent for our HDB shops is no longer the only viable system. Some risks of the upsides and downsides ought to be shared between the tenant and the landlord, in this case, the HDB. My sense is that the shops in our HDB heartlands have not recovered as quickly and robustly as the rest of the economy. We must find a way to support the viability of our neighbourhood shops and stalls. They are a necessity. Without these amenities, our residents would be the poorer for choice and suffer much from inconvenience. HDB heartlands are fertile ground for entrepreneurs. HDB can contribute to our economy's future by helping to nurture the next wave, a generation of entrepreneurs.

For example, a portion of the rental can be tied to revenue. HDB has a broader role than just putting a roof over 85% of Singaporeans. Within its townships, HDB has the potential to seed the next wave of Singapore entrepreneurs. HDB does not have to be just a rent-extracting landlord.

Dr Tan Boon Wan: Sir, shops in the precinct and neighbourhood centres are generally facing difficulties and the shopping malls are bustling with activities. However, shops in some areas are doing well. Where the actual demand has

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fallen, due to the relocation of residents, a return of the shop for a HDB grant is appropriate. In other areas, business may have fallen due to the shops not keeping up with the changing needs of the clientele, upgrading the physical aspects may not be enough. Service is poor or non-existent, goods are haphazardly displayed, overflowing into the corridors, looking more like

a poorly organised warehouse than a retail outlet. The shopkeepers need help to modernise their businesses. Does the HDB have any other plans to revive the business in the precinct and the neighbourhood centres?

5.30 pm

Mr Loh Meng See: Sir, on the HDB shops, my request is for the Ministry to consider granting the exit package to the rental shops, if their business is not viable and there is an over-capacity. With the economic growth as it is today and, yet, if our HDB shops are not able to make ends meet, I shudder to think how long they can stand under those circumstances.

I would like to ask the Ministry to favourably consider those locations where there is an over-capacity, the shops are not doing well and the sitting tenants want to opt out, that they be given the opportunity to do so. Because with the shrinking capacity, it will help the remaining shops to have a better fighting chance; otherwise, the pie is being shared by a much larger group of shops. That is the state of affairs in the HDB housing estates, and I hope the Ministry will consider this.

The Minister of State for National Development (Mr Heng Chee How): Mr Chairman, Sir, the Government recognises the important social role that HDB shops play. They not only meet a local need, but they also provide a focal point for residents to mingle and enhance the vibrancy of HDB communities.

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Today, HDB shopkeepers face intense competition from shopping malls and mega-marts. The shopping and marketing habits of Singaporeans, especially the young, have also changed. Although HDB has progressively relaxed its policies on the change of trade, subletting and assignment in order to provide HDB shopkeepers with more flexibility to adapt to changing market conditions, some shopkeepers still find it difficult to sustain their business. One reason for that is an over-supply of HDB shops. Some shopkeepers are also getting on in age and their children are not keen to take over the business.

During last year's Committee of Supply, the Minister for National Development announced that HDB would launch a new Restructuring Programme for Shops (RPS) to assist HDB shop tenants located in areas where there is an over-supply of shops and where the business is poor, to retire from business. The aim is to reduce the over-supply, so that the remaining shops will become more viable. Where it is possible, the RPS will also help HDB shop tenants to restructure and upgrade their shops and business operations. As requested by Mr Arthur Fong, allow me to give an update on that programme.

In June last year, we selected seven sites, which comprised 193 shops in 21 blocks for a pilot programme. The shop tenants were polled on whether they wished to quit their business on a block-by-block basis. Based on the polling results, eight blocks comprising 93 shops, or 48% of the 193 shops, had more than 50% of their tenants voting to quit. In those cases, all the shops in those eight blocks were cleared because more than half of the tenants, according to the polling rules, voted to quit. Those who opted to quit, where eligible, obtained an ex-gratia payment of $60,000. Those who opted to continue their business were relocated to replacement shops and

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were also given a $10,000 removal allowance. The cleared shop space will be converted into void deck space for social and communal uses.

In one of the sites, ie, the one at Sunset Way, the tenants opted to remain in business. In their case, they have embarked on a revitalisation plan to inject more life and bring in more customers and business into the area. The tenants have engaged a consultant to help them map out strategies to revitalise business in that area and how to better to market and conduct promotional activities. Spring Singapore has provided funding support from its Domestic Sector Productivity Fund (DSPF) for that revitalisation project.

We started the RPS on a pilot basis to help us ascertain the response from shop tenants and also whether the scheme needs to be further fine-tuned, as we plan for possible subsequent batches. On the whole, we are happy with the outcome of the pilot project. Nearly half the shops, ie, 48% that were offered the programme opted to move. It shows that the RPS is a workable programme. Together with other on-going clearance of HDB shops, eg, the Selective En-Bloc Redevelopment Scheme (SERS), the over-supply of HDB shops will be addressed over time.

With the conclusion of the pilot batch, we are now ready to extend the RPS to HDB rental shops in general. To benefit as many shop tenants as possible in the shortest time, we will ask those shop tenants, who are interested, to indicate their interest in the RPS to HDB through their Advisers. HDB will consider only those blocks where more than 50% of the tenants have indicated that they wish to be considered for the programme. It will also take into account whether there are other shops nearby to serve the residents, so that residents will not be unduly inconvenienced if the shops in that particular block are cleared. In this way,

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we balance between the business conditions in given areas, the needs of the shop tenants, and also the needs of the residents of that area.

MND will be writing to all Advisers shortly to provide them with more details. If the response from shop tenants is overwhelming, then HDB will have to phase out the implementation at a pace that it can manage.

Mr Loh Meng See has asked for assistance to be given to help long-standing shop tenants exit from their business. Based on the announcement that I have just made, I hope that tenants, who are keen on this, can indicate their interest through Mr Loh.

May I now move on to other points raised by Members? Mr Wee Siew Kim asked HDB to find ways to share business risk with the shop tenants. Currently, HDB shop rentals are adjusted based on prevailing market conditions upon the renewal of their tenancy. Tenants who prefer to have their rents adjusted more regularly can already opt for shorter tenancies, ie, yearly renewal. So, as the market moves up and down, they can be looking at adjusting their rentals flexibly in accordance with the movements in the market. During the recent economic downturn, HDB had also offered rental rebates to tenants to help them tide through their difficulties. However, beyond that, HDB shopkeepers must remember that they are running a business and they need to make their own business calculations. It would be difficult for the Government to share on-going business risks with them and there is a whole variety of businesses that are being conducted in HDB rental shops. Ultimately, how well a business performs depends on whether it can attract and retain its customers. Nonetheless, on the ideas that Mr Wee Siew Kim has mentioned, we will take them into

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account in our on-going review of our policies.

Dr Tan Boon Wan asked for assistance to be given to HDB shopowners to make their businesses more viable, eg, how to better improve their operations, the marketing, and so on. Like shop tenants, HDB shopowners can tap on various schemes offered and administered by Spring Singapore to upgrade their retail skills and business operations. In fact, many have done so. One of the ways in which some have done so was to band together to form management companies to collectively look into the challenges that they face and, where possible, to come up with common strategies to tackle those challenges. They can also make use of funding, eg, under the Spring Singapore's Domestic Sector Productivity Fund that I mentioned earlier, and other assistance programmes and engage professional consultants to help them map out those strategies. In fact, a number of merchant associations have already done so, like those in Marine Parade Central, Bras Basah Complex as well as the one in Tampines-Changkat.

Mr Arthur Fong also suggested that it might be possible to involve the private sector more in the rejuvenation of HDB shop business. In fact, one of the ideas that was mentioned at various points was whether or not there could be managing agents who could take over a particular area and centrally manage it and, therefore, help to promote the business. Under the RPS, we had studied such a variation and obtained feedback. The feedback from industry players suggested that this kind of arrangement for RPS can only take off provided they have great flexibility over a critical mass of shops as well as decision-making power over retail mix. But when you put the two together, what it then means is that some of the existing shop tenants will not be able to

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continue operating under those rules. So it is actually very difficult to do so under the RPS. However, such a suggestion of a private sector agent operating in an overall shop precinct may be workable for new HDB shop clusters. Recently, I visited Punggol Plaza, which is a neighbourhood commercial centre built by HDB but leased out to a master tenant. The shops there are thriving and the residents' needs are well-served. Hence, HDB intends to try out the concept for new precinct shops and it intends to let out a cluster of new shops in Queenstown to a master tenant later this year. So this master tenant will manage the retail mix and carry out marketing and promotions for the shops in that cluster. This would give the shops a greater chance of success. Residents will also benefit from having a more comprehensive range of shopping and marketing options in their HDB shops. HDB will release more details when the cluster is ready for tender.

Mdm Cynthia Phua: Mr Chairman, can I just seek a clarification? I am very concerned about the cluster shops that are to be leased out in the future plans of MND because, currently, a lot of retail shops are being owned by REITs as they have the necessary funds. Would you limit REITs from tendering such neighbourhood shops? Or, would you allow only a single major tenant in that case, rather than to be owned by REITs per se?

Mr Heng Chee How: Mr Chairman, Sir, the planning for the cluster, as I mentioned just now, is in progress. The concept behind doing so is actually to say that for a new cluster of shops that is coming up, where there are no tenants yet, you actually have a master tenant, and this person can better manage the tenant mix so that the entire cluster has a better chance of success. This is the intent behind the move. The Member's point is that she is afraid that REITs will then come and dominate the landscape.

I

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think we will take Mdm Cynthia Phua's feedback on this aspect so that HDB can take that into consideration as it works out the parameters for that particular project.

Car Parks

5.45 pm

Mr Wee Siew Kim: Underground and multi-storey car parks are becoming increasingly common. Unfortunately, not all of them have adequate security measures. Considering that cars are so expensive in Singapore, although it is getting cheaper, it is understandable that car owners get terribly angry when their vehicles get wilfully damaged. According to the Police, there have been an increase in the number of thefts from vehicles in the last few years and, aside from property damage, late-night drivers and passengers feel unsafe in such car parks. Users expect a minimum level of security. May I ask if the Ministry will be implementing measures to require more security features, including the installation of cameras, in our HDB public car parks?

Neighbours

Dr Tan Boon Wan: Sir, I have spoken on the issue of difficult neighbours in previous years. Anecdotally, quarrels among them do not seem to have abated. What is the state of relationship among the residents of our HDB flats? Many problems can arise between neighbours who live in close proximity to each other, practically separated by just a wall. In some instances, no one seems to be in charge as the problems do not lie neatly within the responsibility area of any of the agencies. Take, for example, noise nuisance. As most of our people live in HDB flats, it is important for us to understand what is happening to take immediate steps to ameliorate the situation, to help neighbours to improve their relationships and to have

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mechanisms to resolve problems when they arise.

As the landlord of the buildings, HDB has the most authority and influence to help resolve these problems. More needs to be done. Often, it is easier and less unpleasant to nip the problem in the bud, than to solve a really nasty and unpleasant one in full bloom.

Operating Expenditure

Mr Othman Haron Eusofe: Sir, I note that the MND's FY2006 estimated operating expenditure shows a large increase of $334.7 million or 99% over the revised FY2005 expenditure. Sir, according to the Budget book, the main reason is the increase in MND's running cost, namely, due to capital grant to the Housing and Development Board now being reflected as operating expenditure from FY2006.

There is also an operating grant of $323 million to HDB to finance its operating deficit due mainly to the provision of public housing subsidies. Sir, perhaps the Minister could provide more information to explain theses expenditure items and will similar allocations be required in future budgets?

Community Improvement Projects Committee Funds

Mr Chiam See Tong: Nowhere has seen more discrimination than in the way the CIPC funds are disbursed. The Opposition MPs are completely deprived of CIPC funds while the PAP MPs get the full quota of those funds. The injustice and unfairness is glaring. I hope that the new leadership shall make a genuine effort to rectify the incongruent situation and give Opposition MPs their share of CIPC funds. There should not be any discrimination against any Singaporean who supports the Opposition. They pay

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their taxes, observe the law and do their required time for National Service and why should they be treated so shabbily? Also, the Government boasts that no Singaporean shall be left behind and it wants to build an inclusive society. Those are high-sounding aims but we do not see them in reality. The Opposition in Singapore is always left behind and is not included in such benefits like the CIPC funds.

Mr Chairman: Mr Chiam, your one minute has expired.

The Parliamentary Secretary to the Minister for National Development (Dr Mohamad Maliki Bin Osman): Sir, I would like to thank the Members, Mr Wee, Dr Tan and Mr Othman for raising the issues concerned and, especially Mr Chiam, for his impassioned plea for more funds to be given. I will respond to that later.

Mr Wee Siew Kim had asked for more security measures to be implemented in HDB basement car parks. I think this is not the first time that Mr Wee has raised this issue in this House. HDB has incorporated various security features into its design of its basement car parks. These include facing void openings in the car parks to minimise blind corners and to facilitate surveillance from the public areas and having vision panels in the car park lifts to provide greater visibility at lift lobbies and car park areas.

HDB will ensure that the car park decks and staircases are well lit by providing additional lightings and extending the lighting hours, if necessary. HDB works closely with the Police, the local neighbourhood watch groups to educate the public on crime prevention and to keep a close watch on the car parks that are more prone to crime and vandalism.

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Sir, we must take the approach that security in such common spaces or places is a shared responsibility of the residents, the grassroots organisations, as much as it is the responsibility of the Police. HDB will continue to work with these stakeholders to enhance safety in HDB car parks. However, HDB has no plans to install surveillance cameras in its car parks as it is not cost-effective to do so.

Dr Tan Boon Wan, as he has mentioned, has highlighted again the issue about difficult neighbours in the use of common spaces. He felt that there is a need for us to better manage the use of common areas in HDB estates to cope with issues like killer litter, mitigate disputes between neighbours and so forth.

Sir, common areas in HDB estates are provided for the use and enjoyment of all residents. So I urge residents to be considerate when using these common areas. The notion of it being "common areas" means it is to be shared and when it is to be shared there must be some elements of give-and-take or compromise, as otherwise there would always be disputes in that regard. So, certainly residents who use such common areas should not litter or place bulky items along the passage ways or leave objects in the manner which can endanger the safety of other residents or passers-by. HDB, Town Council and Government agencies have periodically launched publicity efforts to educate residents on the need to keep their living environment clean and safe, for example, in the dengue prevention effort and the Anti-Killer Litter Campaign last year. They will continue to do so.

Disputes between neighbours usually arise when two parties are unwilling to compromise or give-and-take. Basically, where no laws are broken, HDB and other Government agencies cannot intervene. Sir, in fact, as far as possible, we should

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try to encourage these disputing parties to negotiate among themselves because they have got to live with each other. They decided to live together, and that is the nature of our housing estates. That is the nature of our high-rise living condition, you share and, like Dr Tan Boon Wan said, the only thing that separates them is the wall. When they go out to the common spaces they see each other. The sooner they deal with issues the better. So we want to try to make sure that they try to settle the disputes themselves. It is more effective but, I think, if they cannot do so, it is for such disputes to be handled at the local level, for example, by the Residents' Committee. The Residents' Committee are members in the community. They live amongst the so-called disputing parties. Sometimes, they are neighbours. They are in a better position to understand the situation because if, for example, you have an issue of common space, the RC members actually live within the same structure and they are in a better position to advise perhaps the disputing parties on how best they can negotiate the sharing of those spaces.

Sir, the parties concerned can also approach the Community Mediation Centres for assistance. These Community Mediation Centres are available within the community.

Let me move on to Mr Othman Haron Eusofe's question on why there is a big increase in MND's Other Operating Expenditure (OOE) in FY2006 compared to FY2005. In FY2005, the Government reviewed the classification of public expenditures for all Ministries to better reflect Ministries' expenditures. Sir, as a result, the capital grants to HDB have been reclassified from Development Expenditure to Operating Expenditure with effect from FY2006. The capital grant to HDB is to finance the provision of public housing subsidies on sale of flats, CPF housing grants and the normal operating

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expenditure of HDB. It amounted to, as Mr Othman rightly pointed out, $323 million in FY2006. Sir, it is not that the operating expenditure of HDB has increased. It is just as a result of reclassification of an item to better reflect the usage or purpose of that item. So other than the reclassification of this expenditure, there is no change in the classification of other expenditures incurred by HDB. Expenditures on upgrading programmes, SERS, and major infrastructure projects, remain as development expenditure.

Finally, Mr Chiam asked again and pleaded that the Government not be discriminatory against Opposition MPs with regard to CIPC funds. Let me just reiterate again that the objective of CIPC funding is to improve the infrastructure, recreational facilities and general amenities of the whole constituency. The budget is limited and is allocated to the Citizens' Consultative Committees (CCCs) based on the merits of the projects that they proposed. This is because the CCCs interact closely with residents and are, therefore, in a good position to assess the needs of their residents. In response to Mr Chiam's point that we are being unfair to the Opposition MPs because we give PAP MPs CIPC funds, we do not give PAP MPs CIPC funds. CIPC funds are give to the CCCs to operate the proposed projects for improvements in the constituencies. These projects are then presented to the CIPC Committee which will then evaluate the proposals. Town Councils are responsible for the management and maintenance of the common areas in HDB estates. So if Town Councils wish to put up their improvement projects in their estates they can do so using their Town Council fund.

The Chairman: Yes, Mr Chiam. Please make it short.

Mr Chiam See Tong: Sir, the Parliamentary Secretary clearly knows

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that Opposition wards do not have grassroots. In that case, does it mean that we shall never get CIPC funds at all?

Some hon. Members: You have.

Dr Mohamad Maliki Bin Osman: I have not answered, but I think the House has answered on my behalf. Sir, Opposition wards have got Citizens' Consultative Committees. It is not true that Opposition wards like Potong Pasir have not received CIPC funding. As recent as 2004, CIPC funds have been allocated to Potong Pasir to the amount of $71,000 to build children's playgrounds as well as related facilities around it as proposed by the CCC.

Let me reiterate again that the CIPC funds are for Singaporeans. Mr Chiam mentioned earlier that Singaporeans in Opposition wards like Potong Pasir are deprived of the funds. They are not deprived of the funds. The CCC can put up the proposal, which they have, and it has been approved before. So it is not right to say that Singaporeans who do National Service, pay taxes, living in Opposition ward, do not get what Singaporeans who live elsewhere can get.

Mdm Cynthia Phua: Mr Chairman, I just want to make a clarification with MOS. We must allow individual Singaporeans to own and operate HDB shops directly. I think the concern is the concerted effort of the shopkeepers to advertise and promote their centres. If that is your concern, I think there is a way to do it, and that is by way of the amendment of the Town Councils Act. Under the new Buildings and Common Property(Maintenance and Management) Act itself, there is a provision for them to set up an advertisement and promotion fund separately for the promotion of the centre. But this could be done under the Town Councils Act itself. So I would like

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MOS to look at the possibility of amending the Town Councils Act.

Mr Heng Chee How: Mr Chairman, Sir, I think MND and HDB are looking at various ways to help HDB shops do better - whether it is to help them band together and to be able to do joint promotional activities, either on their own or through seeking the help of consultants, or whether it is through some master-tenant arrangements, and also to help those who are not able to cope with the changes and the business is poor to have a way to exit.

Mdm Cynthia Phua's suggestion of having the Town Councils to also get into promotional activities for HDB shops is something that has to be studied very carefully, principally because it is clearly not the primary purpose for which Town Councils are set up. That is not to take away from the importance of having HDB shops improve their operations. It is a matter that would have to be studied carefully.

6.00 pm

Mr Steve Chia Kiah Hong: Sir, I want to clarify with the Senior Parliamentary Secretary. The CIPC funds are managed by the CCC, whose adviser is a Member of the PAP political party. Is that not a case where the funds are politicised?

The Chairman: Mr Chiam, do you have a clarification on the same subject? Then Dr Maliki can reply to both clarifications.

Mr Chiam See Tong: Sir, I wonder whether the Senior Parliamentary Secretary knows the set-up in Potong Pasir. I am the MP there and my chief rival, who is the PAP contestant in the coming election, is the adviser of the CCC. And the way how the CIPC funds are applied for is that I, as the MP, will have to write to my rival who is the adviser of the CCC for support. And if he

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does not give the support, I do not get it. This has been repeated many times. My applications are refused.

Dr Mohamad Maliki Bin Osman: Sir, as much as Mr Chiam acknowledged that he has repeated the point many times, let me just reiterate again. Yes, that is the structure. The structure is that we believe that the CCCs are on the ground and they acknowledge that they are in a better position to reflect the needs of the residents, and we give them that ability to make those decisions and to propose projects for upgrading. The CCC members are Singaporeans. They are not outsiders. They are people living in the community who actually can reflect the needs of the people in that community. So, we have put in a structure where Singaporeans make those decisions. Singaporeans discuss with their advisers and they put up those projects.

Sir, Mr Chiam said that he would have to refer to the adviser who happens to be his opponent in the previous election. He assumes that this adviser is going to be the same opponent in the coming election. I would like to suggest that Mr Chiam discuss any project that he may have with the CCC as well as the adviser for the benefit of his residents. Because the whole idea is that these are projects that will benefit his residents.

Mr Steve Chia asked whether we are politicising it. The fact that he is raising this over and over again, he is politicising it because the point is that these are projects that are going to benefit Singaporeans, not Singaporeans who support the Opposition or the PAP. These are Singaporeans who live in estates where the fund is made available for upgrading works to be done.

Mr Chiam See Tong: rose ---

The Chairman: Is it on the same point, Mr Chiam? All right, I will allow you one last clarification.

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Mr Chiam See Tong: Sir, I cannot understand how funds can benefit Singaporeans when funds are never released to the Potong Pasir Constituency under my charge at all. If there are no funds, how can Singaporeans benefit? I have been there for 21 years, and I have not got one cent yet.

Dr Mohamad Maliki Bin Osman: Sir, as I mentioned earlier, the PAP MPs are also not given the funds. We do not give them a single dollar or say, "This is the amount that you have. Go and use it." We say that the CCCs propose the projects in consultation with the advisers. The CCCs determine whether the projects are useful for the residents. The projects are forwarded to the CIPC and they get evaluated and approved.

There is also the second element of co-funding. Not every project that is being proposed is approved. It is actually not the PAP MPs who makes those decisions alone. It is the CCCs who make those proposals and they have to co-fund. The Committee makes those assessments. The point I am making is that it is not about whether the PAP MP or Mr Chiam gets a single cent or not. The residents are the ones who are benefiting from this programme. Singaporeans are the ones who are benefiting from this programme.

So let us not talk about whether the MPs have the money or not to use it for whatever purposes. The objective of the programme is to make sure that the constituencies are upgraded and given facilities that will benefit them as a whole. I think this point has been raised several times already. I just want to reiterate again that the CIPC fund is meant for Singaporeans, and not individual MPs or Opposition MPs.