Debated in Parliament on 8 Apr 2013.
Order for Second Reading read.
Mdm Speaker, I beg to move, "That the Bill be now read a Second time."
The Housing Developers Act was enacted in 1965 to safeguard the interests of buyers of uncompleted private residential properties through the control and licensing of housing developers. In so doing, the Act also helps to ensure that the private residential property market functions smoothly for the benefit of buyers, developers and other stakeholders in this market.
All licensed developers are required to comply with a set of stipulated controls under the Act. For example, developers are required to provide financial statements to the authorities and use project accounts for the deposit and disbursement of construction loans and sales proceeds. The Act also empowers the Minister to make rules – the Housing Developers Rules – for the implementation of the Act. Advertisements by developers are also regulated by the rules.
The Act itself was last amended in 1984 to introduce the Project Account requirement. However, the Housing Developers Rules have been updated several times, in 1997, 2005 and 2012. For instance, we amended the rules last year to require developers to provide more information to home-buyers on housing projects and properties prior to issuing the Option to Purchase. Such information includes a drawn-to-scale location plan, site plan of the project, unit floor plan and breakdown of a unit's floor area by the various spaces such as bedrooms and balconies.
This Bill seeks to ensure that the Act remains relevant and effective in safeguarding the interests of home-buyers, taking into consideration developments in the private residential property market. We are also taking this opportunity to improve the administration of the Controller of Housing function.
As part of this review, the Urban Redevelopment Authority carried out extensive consultations with members of the public, real estate professionals
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such as property agents and consultants, and professional bodies such as the Consumers Association of Singapore, the Law Society of Singapore, the Institute of Estate Agents and the Singapore Accredited Estate Agencies. The URA also consulted the Real Estate Developers' Association of Singapore and individual developers.
Mdm Speaker, I am pleased to inform you that these parties expressed support for amending the Act, as the various initiatives in the Bill will help foster a more transparent property market and professional real estate industry. In particular, the professional bodies provided many constructive suggestions for its refinement.
This Bill will provide additional safeguards to home-buyers in two key ways. First, there will be measures to improve the quality of information on housing developments and the sale of housing units. This information will enable buyers to make more prudent and better-informed purchasing decisions. Second, housing developers will be subject to higher standards of accountability and professionalism, so that their business activities will further enhance the credibility of the industry. This set of amendments deals with the Government's regulation of developers
Mdm Speaker, I will now detail the key amendments proposed, starting with measures to improve the quality of information made available to the public.
First, we will amend section 22 of the Act to empower the Minister to make rules requiring developers to accurately depict homes through show flats. Many home-buyers base their purchases on what they see in the show flats. It is therefore crucial for show flats to be built to scale, and be "WYSIWYG", or what you see is what you get.
For instance, all structural walls of a show flat should be erected with dimensions as per approved in the approved building plan. Using a glass panel in lieu of a solid brick wall would be misleading. Likewise, the ceiling height of a show flat shall be the same as that approved in the building plan.
This Bill also introduces section 17A to empower the Controller of Housing to investigate and penalise instances of non-compliance with the requirements relating to show flats.
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Second, we have made provisions in this Bill to give the Minister new rule-making powers requiring developers to disclose and publish all rebates, discounts and other benefits offered or extended to home-buyers.
Over the years, we have noticed more and more developers offering discounts to home-buyers. More recently, some developers have started to mark their units at a higher price, while offering significant discounts through rebates and other benefits such as furniture vouchers. Such inflated sale prices mask the real transacted prices and undermine transparency in the property market.
The proposed amendments will require developers to provide accurate information on residential transactions to the Controller of Housing in the same way they would to the Monetary Authority of Singapore for the purpose of loan applications. In other words, they will need to disclose any price discount, rebate, or any other benefit, including the reimbursement of any stamp duty or tax granted to home-buyers.
In addition, section 11 of the current Act will be amended to give the Controller of Housing legal power to collect and publish information on building projects, units sold and made available for sale by developers, and sales transactions. Data collected will be published in an aggregated fashion, as frequently as weekly, to aid home-buyers in timely decision-making.
Mdm Speaker, I will now outline how this Bill enhances the governance of housing developers.
First, the amended section 7 will expand the grounds on which the Controller of Housing can revoke or suspend a licence. New grounds for revocation include the failure of the developer to furnish information concerning the development project, sale of the project and sales transactions. The amendments to section 25 will also debar persons who have been convicted of, or have served a sentence of imprisonment for, a fraud or dishonesty-related offence in or outside Singapore, from holding or continuing to hold responsible positions in a licensed housing developer for a period of five years.
Second, this Bill will require developers to make public their audited financial positions. Currently, section 10 of the Act requires a developer to publish its last audited balance-sheet and profit and loss account. This section will be amended to require a developer to submit its audited accounts and the
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report of its auditor to the Controller of Housing. In addition, the developer must allow the public to freely inspect the accounts and report for a period of 24 months either via the Internet or at its place of business.
Third, this Bill empowers the Minister to set rules regulating the marketing and promotion of residential units. This goes beyond the existing regulatory scope of advertisements. The new rule-making powers will allow us to regulate marketing and promotional activities across a variety of channels and platforms. They will also allow us to ensure that the marketing and prospective sale of residential properties are conducted in an orderly and transparent manner, with due regard for the interests of all buyers.
For instance, rules could be introduced to regulate the practice common among some developers to collect blank cheques from prospective buyers as a form of advance booking for a residential unit. Although developers will retain flexibility in their marketing and promotional activities, the new rules will empower the Minister to regulate such activities if there is a need to do so in the future.
Fourth, this Bill substantially increases the monetary penalties for non-compliance. For example, the maximum fine imposed on developers who fail to comply with any of the conditions laid out in their licences will be raised from $20,000 to $100,000; they could also be subject to an imprisonment term of up to three years.
Madam, we believe that this Bill is timely. A home is, in most cases, the single largest investment in one's lifetime. It is only right that home-buyers are provided with the appropriate tools and legal safeguards to make informed decisions. This Bill will also enhance the professionalism of the residential property industry. With that, Mdm Speaker, I beg to move.
Order. I propose to take the break now. I suspend the Sitting and will take the Chair at 4.40 pm.
Sitting accordingly suspended
at 4.18 pm until 4.40 pm.
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Sitting resumed at 4.40 pm
[Mdm Speaker in the Chair]
Debate resumed.
Mdm Speaker, I support this Bill. Given that land commands an exalted premium in Singapore, it is not surprising that residential property is not just what a typical Singaporean thinks of, it is also what he thinks with. Residential property, HDB or private, is the single largest asset for the vast majority of Singaporeans. HDB dwellers often aspire to upgrade to private housing. Private housing developers are very attuned to these upgrading aspirations and the fear factor among prospective buyers that characterises an exuberant private residential property market.
Many major life decisions are made with residential property being a key factor. For example, the location of one's residential property can be very much influenced by where one wants his children to be schooled. Courting couples often make the leap into a future together by first purchasing their matrimonial homes, often with the marriage proposals coming later!
In short, we do not just think of property when purchasing a new home. Rather, the residential property becomes something we think with in making other major decisions for the family.
The residential property market remains robust in my view, despite several rounds of cooling measures. This is testimony to the centrality of residential property in the Singaporean psyche and wellbeing.
As a result of the lucrative profits that can be made, housing developers often compete to out-do each other, sometimes through unscrupulous means, often at the expense of the eager but unsuspecting homebuyer. Advertisements are either economical with the relevant information or may even misrepresent. The truth will only be known when the homebuyers receive their keys and see their properties for the first time. By then, it is too late to back out.
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To be sure, there is the legal doctrine of caveat emptor. Although a buyer, whether of a piece of cake or a residential property, must be aware of he is getting into, it is also clear that property buyers need protection as consumers given the big-ticket item that a home purchase is. There must be responsibilities and duties that come with the privilege of being a licensed housing developer. Such a licence cannot be the fast lane to unscrupulous profit making.
We often see advertisements of private residential developments surrounded by lush greenery, with the nearest residential development being some distance away. Showrooms, a favourite haunt of Singaporeans trying to secure their dream home, are where prospective buyers are cajoled to sign along on the dotted lines. And housing developers spare no effort in the design and ambience of the showrooms.
But what a prospective purchaser sees may not be what he will get. What is fact or fiction often becomes blurred in the showroom and in the promotional materials prepared by the developers. The disclaimer, or excuse, is simply described as the "artist's impression".
Madam, developers should not be allowed to profit from deliberate inaccurate representation of the housing units available for sale. Further, given the information asymmetry that often exists between the buyer and housing developer, the information playing field should be made as level as possible so that prospective buyers can make informed decisions. Caveat emptor and consumer protection cannot operate if housing developers do not provide relevant information that is presented clearly, accurately and easily accessible.
As such, I welcome clause 16 to empower the Minister to provide for the regulation of the display of show flats, with accuracy of representation being the desired goal. In May 2012, the Housing Developers Rules were amended to better protect home buyers by requiring developers to provide not just more but also accurate information such as the scaled location plans, unit floor plans and detailed breakdowns of a unit's floor area. This is to enable homebuyers to make better-informed decisions concerning a significant asset.
This must be the key objective of the law before us today. Caveat emptor still applies but homebuyers should not have to navigate treacherous waters because of housing developers' penchant for varying formats and selectivity in presenting relevant information. Would the Senior Minister of State be able to elaborate on how his Ministry intends to more robustly enforce the law?
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In this regard, I welcome the various clauses in the Bill to require developers to provide more comprehensive and timely information to the public and the regulatory bodies. As a rule of thumb, the more information that is available on a timely and accurate basis, the better it is for the prospective homebuyers in helping them decide if they have a fair deal.
In particular, clause 19 of the Bill, which requires developers to lodge with URA information pertaining to the discounts provided for units sold, can give transparency a much-needed boost. Generally, clause 19 also enables URA to collect and publish more comprehensive and timely information on the transacted prices of private residential properties. Such information can help reduce the frenzy and fear factor that accompanies information gaps. In this regard, does the Ministry have any plans to make as much consolidated market information available freely as opposed to a fee-paying basis than what it is at the moment?
The Government has a responsibility to ensure that the property market is not one denominated by the lack of information, allowing unscrupulous developers to prey on consumers, and to have prospective home buyers go into needless price bidding wars that only serve to power the over-exuberant property market.
As the residential property market is likely to remain a sellers' market for the foreseeable future, the need to tighten the entry of housing developers is necessary. There should not be fly-by-night housing developers which are not interested in the industry as long-term players. Similarly, the residential property market demands that developers should not have directors who have been convicted of, or have served a sentence of imprisonment for a fraud or dishonesty offence in or outside of Singapore within a period of five years before the date of the housing developer licence application. It is better to be prudent in this regard.
Madam, the Bill provides for fines to have five-fold increase in quantum. I doubt that this will be sufficient to sustain the deterrent effect that the Bill seeks to endow in the regulatory framework. The quantum of fines still pales significantly when compared with the potential profits to be made. Can the Senior Minister of State provide the number of housing developers licences granted and revoked or not renewed in the last two decades? I believe the figures will demonstrate how lucrative it is to be a housing developer even on a one-off basis. I should add that there is nothing wrong with that except that
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the profits must be fairly earned and not derived through unethical means.
Finally, I welcome the Bill for providing the Minister and/or the Controller of Housing with more power to make rules so as to promptly respond to the changing market practices that often attempt to tilt the playing field to the disadvantage of home buyers.
Private housing has become immortalised as one of the five "C"s integral to the "Singapore Dream". The deep fear of being priced out such that one's dream property becomes rapidly unattainable, and the attempts to "speculatively invest" in property have contributed to the property booms and associated anxieties for both the housing "haves" and the "have-nots".
The proposed amendments before this House can further enhance protection afforded to home buyers and promote transparency in the property market. Madam, I welcome these much-needed amendments. They have a role to play to contribute to the stability of not just the new private housing market but the residential property market generally.
Mdm Speaker, allow me to declare my interest in this topic as a conveyancing lawyer and the President of the Consumers Association of Singapore. Every year, thousands of properties are sold by housing developers directly to purchasers. Except for shoe box units, most of these properties are sold at prices ranging from half a million to about $2 million to $3 million. For many buyers, it has been their lifelong aspiration to upgrade from living in HDB public housing to living in a private property with condominium facilities. It is also usually their largest financial commitment in their life. Many of my clients tell me that the cheque amount for payment to the developer is the largest amount cheque which they had signed.
Unfortunately, not every purchase of a private property from a housing developer ends with the happy fulfilment of their aspiration. Unlike the purchase of completed private properties, buyers from a housing developer do not get to see the physical structure of their property. They buy based on the layout plan in sales brochures and/or from seeing the layout in the developer's show flat.
I have received frequent feedback from buyers that after they collect the keys to their properties, they realise that the unit which they had bought look
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quite different from what they had seen in the developer's show flat. Buyers complain that the size of the flat look smaller because the flat which they bought would usually include a planter area and an aircon ledge. However, in the show flat, these areas may not be reflected in the show flat which makes the show flat look bigger.
There are also some complaints that there were brick or structural walls in the actual flat but which had been cleverly hidden in the show flat design; and that the ceiling of the flat looks much higher giving the impression of a greater volume of the flat. Many show flats also do not show the doors to the room and how much is the required space to swing open the doors. Thus, what they see in the show flat may not be what the buyer actually gets when the buyer receives the keys.
The reality is that many property buyers do buy their properties based on what was represented to them in the show flats. As such, I support the proposed amendments at clause 19 of the Bill to empower the Minister to introduce rules and regulations to ensure that housing developers do not erect show flats in a manner that gives a false impression to buyers or to depict houses or flats with inaccurate information.
I also support the proposed amendments at clause 19 (d) of the Bill which is to empower the Minister to prescribe rules to regulate marketing activities of developers. In particular, I am concerned that some developers when advertising the location of their development would represent in the location maps that the development is situated much nearer to MRT stations or to other amenities and schools than they actually are. In other words, these developers take liberty with the location map. They shrink the distance from the MRT station or amenities to make it look nearer to the development. To me, such form of marketing is misrepresentation and should not be allowed and I understand that rules have been amended in 2012.
There were also developers who had advertised that Phase 1 of the development has been fully sold out without stating how many units have been offered for sale in that particular Phase. Thus, a housing developer can actually offer a small number of units for sale under a particular phase and thus giving the potential buyer a false impression that there is overwhelming demand for the property.
The Government should also disallow the current practise whereby estate agents deliberately queue at the launch of a new development to create the
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hype that there are many buyers wanting to purchase limited units in a development. If this form of marketing activities is not regulated, it will create a lack of market transparency because buyers do not have actual information whether there is real demand for the property.
In the newspapers a few days ago, we read of buyers being told that they would be picked in a lucky draw of some sort so that they have the right to select a property. Is there a real pent up demand or is it a mere marketing gimmick? I submit that the Government should look into the sales and marketing techniques of the developers to ensure that consumers are dealt with in a fair manner and given adequate information about the demand for a property.
I also urge the Government to ban the practice of allowing agents to collect blank cheques from potential buyers to buy a property. Such practice may result in market manipulation in that developers can set the price that they wish to sell since they already have a blank cheque in their hands. It may also lead to fraudulent behaviour by unscrupulous estate agents.
Clause 19 (d) of the Bill also seeks to regulate the giving of benefits to buyers through the issue of stamp duty rebates, cash rebates or other kinds of discounts or vouchers. Whilst it may be argued that the grant of such rebates discounts or vouchers would benefit the consumer or the buyers, the fact is that such rebates in any form distorts the market. It means that any potential buyer would not be able to know what is the market price for the property, since he would not know the discount given to the previous buyer through such rebates or vouchers. Thus, I also support the proposal to regulate the grant of rebates or other benefits in this clause.
I would like to ask the Minister to comment on the following.
Currently, the Housing Developers (Control and Licensing) Act provides that a licence is only required if a housing developer develops more than four units of housing accommodation. Thus, if a developer builds only four units of housing accommodation, he does not require a developer's licence and he is not subject to the regulations imposed under the Act. Would MND consider imposing the requirement for a housing developer's licence for any development of more than two units? This will reduce the risk of any buyer who buys a property from an unlicensed developer.
Next, in the prescribed sale and purchase agreement for a property subject to the Housing Developer's rules, there is a provision in the agreement that the
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developer has a margin of error of up to 3% in the actual area of a property for which the developer does not need to compensate the buyer. In view of the high prices of properties, would the Government be prepared to reduce the margin of error to 1% of the area of the property? Thus, if the actual area of the property is smaller by more than 1% of the area stated in the sales and purchase agreement, the developer would have to compensate the buyer.
Next, would the Government also consider excluding the unusable areas like planter box or air-con ledge in the computation of the area sold by the developer? These are not really usable areas in the flat and there is no reason why the buyer is asked to pay for such an area.
Finally, if I may ask the Senior Minister of State, what is the intent of the Government in deciding to delete section 22(2)(b) of the Act? Does this mean that the developer no longer needs approval for the name of the housing estate? Would this lead to meaningless or misleading names of the housing estates? Mdm Speaker, with this, I support the Bill.
Thank you, Mdm Speaker, for allowing me to speak on this Bill, which will seek to provide better protection for those seeking to buy property. Whether people are buying property for investment or to live in, they should not be exposed to exploitation and be protected. There are a few ways in which potential buyers can be exploited, misled or given false information.
I have heard recently from several friends and acquaintances that the developers have now become very innovative in marketing their new launches. I was told that they will advertise that a particular flat is, say, 1,400 square feet, for example. But when they view the property, they realise that it does not seem as big as 1,400 square feet. When they probe, they are then reluctantly told by the marketing or the sales agent that the 1,400 square feet size includes the bay windows, balcony, the access area, and in one case, I was even told that the personalised parking lot was included. I stand corrected. So, in effect, the property size was much smaller.
For such misrepresentation of details, we must take the developers and the marketers to task so that potential buyers know exactly what they are getting themselves into and are not misled by such jargons. Given the high property costs in Singapore now, we do not want buyers here to spend through their
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noses and not receive the accurate value for what they think they are buying or paying for.
The same goes with the show flats that developers put up. I have heard that the developers have many tricks up their sleeves and employ them to make the show flats look much bigger and nicer than what the actual property looks like or comes with. In other words, in many instances, the show flat is an illusion. Such tricks include higher ceilings and mirrored walls to make the apartment look much more spacious than it actually is, or lavish fixtures and fittings to make the property look much more appealing. I think we should mandate that the developers do not use these tricks any more. Show flats should be mandated to look as close as possible to the eventual product sold to the customer. I hope the Minister will take this into account when deciding the specifications of the show flats for developers. Overall, I am happy that this Bill includes provisions that will help developers play a fair game with potential buyers.
In discriminating convicts, I do feel, however, that there is an over-generalisation of former convicts in this Bill. Yes, we recognise that the Bill is taking the necessary steps to protect buyers and even the developers in some cases of potential fraud. But to specifically assume that an ex-convict guilty of fraud offences is likely to do so is I feel unfair and playing to stereotypes.
We must remember that the ex-convicts, when released into society, sometimes struggle to earn equivalent jobs again in our society. Especially those who were convicted of white collar crimes and are educated may not be able to find professional jobs again and may have to settle for odd jobs or low-skilled jobs to earn their living. For many, jobs in such sales positions may be a second chance to earning a decently paid job again and we should not close that door on them. I fear that after this Bill is passed with these provisions, developers may on the whole not hire ex-convicts at all, in the fear of running afoul of the law. That would be sad, as we should do all we can for the convicts to assimilate back into society.
I must make an appeal that the authorities do not take a harsh stance on associations in this regard. In some communities in Singapore, some of the places of worship and some of the important community social organisations are registered as associations due to historical reasons. It is important for some of these organisations to develop their own property either for operational or administrative use or to raise revenue. So, in this context, requiring them to have prior paid-up capital may not be possible for such associations and they may still be fund raising from their members to develop the property. I hope
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the Minister will look into associations, therefore, on a case-by-case basis and not unduly penalise the ones who are not-for-profit and are important components of our social fabric. On the whole, Mdm Speaker, I support this Bill.
Mdm Speaker, I rise in support of the Bill. Many agents sell properties based on three reasons: location, location and location. But for many buyers, the decision to buy a property should be based on what is inside the unit, what is outside the unit and what is surrounding the unit.
Let me share the experiences of my residents at a Design, Build and Sell Scheme project in Ang Mo Kio, feedback from others and my own visits to many show units recently.
Firstly, let the show units accurately reflect the space inside the unit as well as what is available inside. Many were frustrated that their kitchen, living room and bedroom appeared smaller when they moved in. In some cases, show units that they visited had interior designs that gave the illusion that it will be spacious, similar to the point mentioned by the hon Member Mr Lim Biow Chuan earlier.
Amendments to the regulations in 2012 requiring that developers indicate accurate to scale floor dimensions is a step in the right direction. But that is not enough to achieve "what you see is what you get". For example, one will notice that many show units do not come with doors. Upon collecting their keys, some were appalled that they could not even open the door to the toilet without it banging against the toilet seat. A resident showed me in his new flat how he could not open the door to his wardrobe after he put in his bed. He had to change the door to a sliding one because the design had not catered for that.
Perhaps we can expand the regulations. When we visit a show unit, we should be able to see what we will be getting upon making a purchase. For instance, any walls that may have been removed for interior design needs should be accurately reflected in the show units, including the thickness of the wall on the floor and not just a solid line on the floor. I also hope that, in future, doors will be installed in show units as well.
Secondly, let us move to what is outside the unit. In the past, residents were not informed by the developer regarding the dimensions of the balcony, aircon
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ledge and planter box. It was only until they moved in and did a physical measurement that they realised the dimensions of these areas. In fact, a floor area of 1,200 square feet could have up to 100 square feet of space occupied by these features, a point made in an article in today's The Straits Times Forum Page that indicate that the recent change of such a regulation is in the right direction because now consumers know what they are getting into and the developers are required to indicate what are the sizes of these areas.
However, many continue to be unaware of the restriction concerning what they can do with the balcony area or planter box area. Some thought they can install full-height windows but did not know they were not allowed to. However, it was shown in the show units that it was there although it was for display purposes only. They now have to pay money to uninstall what they have installed. Developers should make it clear, not only in bold print in their collateral but also at show units that such fixtures are not allowed. It is not viable for residents to have to separately check with HDB, URA and BCA on the various restrictions.
Thirdly, let us look at what is surrounding the unit. Some residents who bought units next to vacant land were upset when they found out that new Build-to-Order flats or new institutions would be constructed next to their blocks after they have moved in. They shared that the developer had not indicated any new residential development on that particular plot of land in the collateral. Instead, the artist's impressions showed the development set amidst lush greenery and even omitted some other existing flats. I reviewed some of the old brochures that they shared with me and it clearly showed unobstructed views.
In fact, a staff from the developer informed me and the residents that all land use plans are available from URA, and buyers can go down to Maxwell Road to do their own checks to find out what are the actual plans around the development and to go to the Internet to check what "plot ratio" means. Yes, the onus is on the buyer to do his or her own checks before making a purchase. However, many lack the awareness and know-how to go about doing so. Some of the artist's impression drawings can often be misleading.
I am glad that the Ministry has addressed some of these concerns in last year's changes to the regulations. I would like to propose that developers show accurate spatial distance between existing and to-be-constructed new buildings and land use plan. This should cover a two-kilometre radius around the housing development which is put up on sale. This two-kilometre radius is similar to the Primary 1 registration Phase 2C coverage because they specifically, in their marketing
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collateral, promote that as an attractive option. Whether there will be an educational institution, condominium or religious institution nearby should be made known to the buyers. Many developers are only keen to show shopping malls, schools and facilities.
Finally, the amendment to the Bill to improve quality of information given by the developers to the buyers is timely. One area which is not currently addressed is the information given by property websites. Many such sites have popped up recently and many buyers are turning to them for reference. Moving forward, I hope that the Ministry can look into ensuring that any representation or reproduction of housing accommodation and land use featured by these websites is accurate. Of course, there are many challenges dealing with property websites, but I believe this is an area which will be increasingly important. Madam, with that, I support the Bill.
Madam, I declare my interest as a bank employee. Mdm Speaker, I support the objective of the Bill which provides additional safeguards in two ways, namely, improving quality of information and enhancing governance of developers to home buyers and better protection of their interests by ensuring that the Act remains relevant and effective in light of industry developments and dynamic property market trends.
I noted the Bill will provide four areas of improvement: show flats, information of sale transactions, marketing activities and disclosure of financial status. Accurate and timely information on market values of homes is important to buyers. Inflated sale prices can mislead buyers and undermine market transparency and lead to distortions of the home market. Hence, it is important that full disclosure and publication of all rebates, discounts and other benefits, whether directly or indirectly granted by developers, should be made known to the home buyers, and such information should not be wilfully withheld by developers. Such benefits should include legal and valuation subsidies, whether in part or in full, by third-party, including financial institutions.
Developers shall also make known to the public the total number of units that have been sold to the inter-related parties, such as directors, their immediate families and business associates, to ensure transparency of sales information. In addition, there have been public criticisms over questionable practices, for example, collecting blank cheques in advance, paying people to queue outside show flats to create hype, and misrepresentations of sales
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bookings and so on.
While the Bill is set up to address these issues and inject new rules to regulate irregular marketing activities, they may be administratively difficult or challenging to enforce, thus resulting in ineffectiveness of enforcement action. It is always a question of balancing between rigidity and practicality. Nevertheless, having a robust market regulating framework is key to ensuring an orderly and transparent market for the benefit of buyers and maintaining public confidence in the housing market.
While the developers and their marketing agents have been focusing on the distinct features and attractiveness of the project site, including proximity to amenities and facilities, such as popular schools and shopping, it may be prudent for the developer to adopt a balanced and objective approach in his publication of sales information to highlight the potential trade-offs arising from being close to such facilities, such as schools and shopping malls, as these areas could produce noise and heavy traffic congestion.
There has been a mandatory requirement for financial institutions to ensure investors are aware of the prevailing and investment risk factors so that investors can make informed decisions. I hope a similar practice could be encouraged to minimise unnecessary and undesirable disputes between buyer and developer and its marketing agent.
Madam, property purchases require radically larger financial commitments from buyers. The financial health of developers is paramount and is important information to home buyers. The Bill that requires the developer to submit audited accounts for the financial year and auditors' report as opposed to the present requirements that require the developer to publish the last audited balance sheet and profit and loss account is only welcomed by home buyers. This will help facilitate more prudent decision-making by potential home buyers. This will instill discipline in developers to ensure a clean bill of health that will serve home buyers' interests.
However, there is a need to provide better clarity to the rules. A special purpose vehicle is usually set up by the developer to undertake a property development. Therefore, home buyers should be allowed to have access to the audited accounts and auditors' report of the ultimate holding company or the developer company to have a more complete picture of the overall health of the developer. In the absence of holding-subsidiary relationship, perhaps the developer could provide a bank confirmation that the shareholder has the
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financial means to ensure the completion of the development.
Madam, I appreciate the Ministry's efforts to consult the public, real estate professional bodies and consumer associations regarding the Housing Developers (Control and Licensing) (Amendment) Bill. In conclusion, I think the refinements are in the right direction. They will improve the quality of information and resources to the public so that it enables home buyers to make better informed and more prudent decisions. Secondly, they will enhance the governance of developers to ensure they carry out business activities in ways that best serve the public interest. The Bill injects greater rigour in accepting and assessing licence applications. Sales suspensions and revocations of licence are good deterrence for errant developers. With that, I support the Bill.
Mdm Speaker, I thank Asst Prof Eugene Tan, Mr Lim Biow Chuan, Mr Dhinakaran, Mr Ang Hin Kee and Mr Gan Thiam Poh for their many very good suggestions and for spending time to read the amendment Bill, and also for their general support of the Bill. I would also like to thank all Members who have previously shared their feedback and suggestions.
Many of the suggestions raised by the Members relate to the provisions we can include under the Housing Developers Rules and not so much the Act per se. So, let me assure the House that we will take these views into account as we embark on the changes to the Housing Developers Rules, following the passage of this Bill.
Let me also respond to the various points raised one by one. Asst Prof Tan, Mr Lim, Mr Dhinakaran and Mr Ang suggested that show flats be better regulated. We agree and are, therefore, prescribing show flats as an area in which the Minister shall be empowered by this amendment Bill to make precise rules. While we have yet to finalise all the new rules, we have thought about a number of areas which we intend to tighten up. For instance, we intend for all structural and external walls to be erected in the show flat, in the same thickness as the final product. All "add-ons", such as furnishings, finishes and interior fittings, must be duly labelled and made known to the buyers. The Controller of Housing will also be granted investigative and enforcement powers to enter and even close show flats if serious breaches are discovered.
Mr Lim asked if the Government would consider reducing the margin of error, as stipulated in the prescribed sale and purchase agreement, from 3% to
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1% of the area of the property. This provision of a margin for error exists as variations in floor area could arise due to construction difficulties or the use of different construction methods. Our view is that this plus or minus 3% could be reviewed in the future if technology allows for more accurate construction methods. We have received very few complaints on this matter over the past 10 years.
With regard to Mr Lim's suggestion on the exclusion of unusable areas such as planter boxes and air-conditioner ledges, in the computation of the area sold by the developer, we do not think it is necessary to do so now. Today, developers are already required to indicate on the plans and in the showroom the exact dimensions of such ancillary spaces so that buyers can make informed purchasing decisions. Although these areas are perceived to be less useable, they are, nonetheless, functional spaces which constitute a residential unit, and it is the responsibility of home owners to maintain them. As such, these areas should still be computed as part of the strata area of a unit. Even if developers were required to exclude such areas from the computation of prices, they could compensate for this by marking up the average per-square-foot price of other parts of the unit.
Mr Lim also urged the Government to disallow some of the practices of real estate agents, such as the deliberate forming of queues at the launch of a new development, as well as the collection of blank cheques from potential buyers to buy a property. For a start, the Council for Estate Agencies (CEA) is already working with the relevant Government agencies and the real estate industry to set guidelines on the collection and proper use of cheques. We have also made provisions in this Bill and will monitor the situation before assessing if further regulatory safeguards are needed.
Mr Ang has called for greater regulation of property websites which may provide inaccurate information to the public. He has also called for more information to be supplied to buyers on the developments, features and amenities in the vicinity of the housing project, a point echoed by Mr Lim as well. These are suggestions that we will consider as we refine the Housing Developers Rules with the passage of this Bill.
Asst Prof Tan has asked if we will make as much market information freely available to the public without the need to pay a fee. I wish to inform the House that comprehensive real estate market information is already provided free-of-charge to the public on URA's website. Such information is also provided through mobile Apps made available by URA which home-buyers can download free-of-charge if they want to access information on-the-go. This Bill
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will enable us to enhance the existing information to be provided and to do so in a more frequent and timelier manner.
Mr Lim asked for the rationale behind the deletion of section 22(2)(b) of the Act. We have deleted this clause as the function of regulating names of buildings and estates is now under the Street and Building Names Board. Since April 2010, the Urban Redevelopment Authority has taken over the secretariat functions of the Board. So, names of housing developments should still have to be approved by this Board.
Asst Prof Tan suggested that the Bill can go further to provide the Minister and/or Controller of Housing with more power to make rules so as to promptly respond to rapidly changing market practices that attempt to tilt the playing field to the disadvantage of home-buyers.
Mdm Speaker, the approach we are taking with this Bill is a balanced and fair one. We fully recognise how dynamic the private property market is. Hence, it is important for us to be nimble in the face of new concerns and problems which may arise now and in the future. This Bill already empowers us to make rules in several key areas, if and when necessary. So, I thank Asst Prof Tan for his suggestion.
The Members have also provided feedback on specific issues relating to the Act. Let me respond to them.
Mr Lim asked if the Act could be extended to impose the requirement for a housing developer's licence for any development of more than two units. This is, indeed, an issue we are looking into. However, we will need more time to fine-tune the implementation details to ensure that small developers are not over-burdened by new requirements, without compromising the protection extended to home-buyers. We will consider this in a future round of the amendment of the Act. Suffice to say, on average, less than 1% of our development comprises five units or less.
Asst Prof Tan has also asked for the number of licences granted and revoked or not renewed. I would first like to clarify that a licence for each project undertaken by a developer is valid until the project is completed. There is, therefore, no renewal of licences involved. Since 2000, some 6,800 licences have been granted to developers. Of these, there has, so far, been no licence revoked but there have been a small number of cases in which the Controller of Housing has disallowed developers from selling units off-plan. I believe this
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attests to the overall professionalism of the industry.
Asst Prof Tan and Mr Lim are of the view that the increased fines are still not hefty enough and may not be a sufficient deterrent to the cash-rich developers. I understand their concerns if fines are the only deterrents developers are liable to. Instead, the deterrence measures contained in the Bill are multi-levelled, including imprisonment, suspension and revocation of licence.
For example, the Controller of Housing can prohibit a developer from marketing and selling homes until all units are fully completed. This applies not only to the project in question, but also on the developer's future projects. Developers' revenue inflows will be severely constricted as they cannot rely on instalment payments received during the construction process to fund development of the project. There is also the negative impact on the developer's reputation amongst would-be buyers. A developer also risks affecting his track record, which is a key assessment criterion for future licence applications.
We believe that all these, taken together, constitute sufficiently strong deterrents against offences. We remain watchful of the situation and we will not hesitate to push for harsher penalties, through further legislative amendments, if necessary.
Mr Dhinakaran commented that there is an over-generalisation of former convicts in this Bill. Let me clarify that the Bill does not permanently prohibit companies from hiring ex-offenders. Instead, the Bill imposes a five-year debarment period during which ex-offenders cannot take up responsible positions in a licensed firm. This approach is consistent with the disqualification for persons convicted of fraud and dishonesty-related offences from holding company directorships under the Companies Act.
We think this requirement is fair because developers are selling properties for significant sums of money. It is, therefore, important to ensure adequate prudence in the licence-approval process. The Act defines a "responsible position" in a company as a director, manager or secretary; companies which employ ex-offenders in other positions are not affected by the requirement.
Mdm Speaker, let me conclude by saying that the Bill is not a short-term response to the current state of the private residential property market. It is a timely and necessary exercise to enhance the administration of the Controller of Housing function and ensure that the Act remains relevant and effective. It
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seeks to protect buyers of uncompleted private properties by stipulating greater clarity in product information and developers' obligations in marketing and transaction. Our developers here have largely been responsible and professional in their dealing and, with this Bill, we hope we will raise the professionalism and efficient working of the industry. Mdm Speaker, I beg to move.
*Question put, and agreed to.*
*Bill accordingly read a Second time and committed to a Committee of the whole House.*
*The House immediately resolved itself into a Committee on the Bill. – [Mr Lee Yi Shyan].*
*Bill considered in Committee; reported without amendment; read a Third time and passed.*
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