I REFER to the letter, 'Deficit in HDB flat sales a paper loss to Govt' (ST, Dec 14), by Mr Steven Lo Chock Fei.
Mr Lo agrees that CPF housing grants are a tangible cost to the Government. However, he feels that new HDB flat prices are not really subsidised because the land is not priced at original cost.
We wish to explain why he is mistaken. Whenever state land is sold by the Government, it has to be done at market price, whether for public or private housing. If not, it may result in a drawing on past reserves for which the President's approval is required under the Constitution. This price takes into account the fact that substantial resources are invested to provide major infrastructure, such as roads, MRT, sewers and utilities, for the new housing development. The land value would have been significantly enhanced beyond the acquisition costs incurred by the Government.
The price of HDB flats takes into account the market value of the land. In order to make the flats affordable, they are sold at a price which is lower than the market. The difference in price is the subsidy. It is a real subsidy, and not a paper loss.
First-time buyers can choose to buy resale flats with the CPF Housing Grant, or buy new flats directly from HDB with a built-in subsidy. The fact that many buyers choose to buy new flats instead of resale flats using the housing grant shows that the subsidy given to new flats has a tangible value.
HDB does not reveal the land and construction costs of specific projects as they vary from location to location, and from time to time. However, overall, it is unable to recover the development cost of new flats. That is why it incurs an overall deficit each year for its home-ownership activity, as reflected in its annual accounts which is available publicly.
Kee Lay Cheng (Ms)
Deputy Director
(Marketing & Projects)
For Director (Estate Administration & Property)
Housing & Development Board
