Debated in Parliament on 12 Feb 2019.
Mr Ong Teng Koon asked the Minister for National Development whether the Ministry will consider extending HDB's deferred downpayment scheme to 4-room and 5-room BTO flats and to applicants with low income.
Mr Speaker, the Housing and Development Board (HDB) requires new flat buyers to pay a downpayment of 10% or 20% of the flat price when they sign the Agreement for Lease within four months of booking a flat, to ensure that applicants are financially ready to commit to the flat purchase. The balance flat price is then payable when they collect the keys.
Deferred downpayment is a specific scheme for seniors and it is meant to facilitate the right-sizing process. Specifically, elderly flat owners aged 55 and above who are buying an uncompleted 2-room flexi or 3-room flat from HDB may apply for this Deferred Downpayment Scheme. So, it is really meant for seniors to facilitate rightsizing.
Separately, HDB also has a Staggered Downpayment Scheme (SDS) where flat buyers are required to pay half of the downpayment when they sign the Agreement for Lease and pay the other half together with the balance purchase price at key collection. This SDS is available to first-timer young couples below the age of 30. They can qualify for such a scheme when they buy any flat type from HDB, including 4-room and 5-room flat types. SDS is also available to flat owners who are rightsizing to a 2-room flexi or a 3-room flat in non-mature estates, regardless of the age of the flat owner.
Home seekers should continue to exercise financial prudence and buy a flat within their means. And for those who face difficulties with their downpayment, HDB can provide assistance on a case-by-case basis.
Mr Speaker: Mr Ong Teng Koon.
I would like to thank the Minister for the SDS. It is good to know that there is such a scheme to help young home owners. My question is: is the downpayment a form of credit protection? What is the purpose of the downpayment? If it is a form of credit protection to ensure that the flat owner does not renege on his transaction, then would it be right to say that if he already has equity in his existing flat and HDB has control over the process of the sale of his existing flat and the purchase of his new flat? If HDB has control over all these things, would it be correct to say that his equity in his existing flat is sufficient downpayment and sufficient credit protection for the downpayment for his new flat?
Mr Speaker, I am afraid I have lost the Member. Was the Member asking a specific question again?
Yes. Why do you need a downpayment?
So, the Member is asking whether we need a downpayment to begin with?
Yes.
Zero downpayment for all purchases of all HDB flats?
I was referring to specific cases where there is an existing flat and the home owner is moving to another flat and HDB has control over both flats. Why do you need a downpayment in such cases?
Mr Speaker, so long as the flat owner, regardless of whether they are new, first-timers or existing flat owners, when they would like to make a purchase of a new flat, the downpayment is an indication of commitment and an indication that the person is seriously making a commitment to purchase a flat because if they were to simply put in a free option and then renege on that option later on, they are, in fact, depriving other potential flat buyers from purchasing that flat. It will be an opportunity cost. So, we do want a downpayment policy and we want potential flat buyers to take the purchase of their flat seriously.
As I mentioned earlier, we do have the SDS to help both young couples, as well as flat owners of all ages who are rightsizing. So, those are specific instances where we allow for staggered downpayment and, if there are other flat buyers who have difficulties, they can approach HDB and we can help them on a case-by-case basis.
PAPERCUTS