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No ‘triple payment’ for land used to develop HDB flats: Indranee Rajah

Leader of the Opposition Pritam Singh and Second Finance Minister Indranee Rajah also debated whether HDB should provide a breakdown of BTO projects' development costs.

No ‘triple payment’ for land used to develop HDB flats: Indranee Rajah

HDB flats under construction. (File photo: TODAY/Raj Nadarajan)

SINGAPORE: There is no “triple payment” by Singaporeans for the land used to develop Housing and Development Board (HDB) flats, said Second Finance Minister Indranee Rajah in Parliament on Monday (Nov 7).

She was replying to parliamentary questions from Non-Constituency Member of Parliament Leong Mun Wai, who asked for the cost of state land used for public housing when initially acquired by the Government.

Leader of the Opposition Pritam Singh and Ms Indranee also debated whether HDB should provide a breakdown of the development costs for Build-to-Order (BTO) projects, with the minister saying that affordability is what matters to Singaporeans.

Mr Leong also asked for the difference in the higher land cost when the HDB bought the land for development versus when the Government initially acquired the land.

A third question relates to whether taxes to cover the difference then amount to “triple payments” for use of state land that are developed into HDB flats, if the land acquisition and development occurred in two different terms of Government.

Ms Indranee, who is also Second Minister for National Development, emphasised that when state land is sold, a physical asset is converted into a financial asset, and there is no net increase in the reserves with this transaction.

She explained that under Singapore land laws, which can be traced back to English land laws, all title to land in Singapore is derived from the State and the state leases the land to others.

The leases confer ownership and possession of those lands to these individuals only for the duration of the lease, and it reverts to state ownership after that period.

Under a 99-year lease, the State still holds the land “for perpetuity” after the 99 years is up. This is referred to as “reversionary interest” or future right to the land. 


Land that was not leased out by the state remains state land, and under Singapore’s Constitution, all state land forms part of the country’s reserves.

“For example, if we sell a parcel of state land at its fair market value of, say, S$1 million, we no longer have the land for the term of the lease sold, but we have S$1 million,” said Ms Indranee.

“We have merely changed the physical land in our reserves into an equivalent amount of financial reserves. There is no new value created and hence no addition to the reserves.”

The S$1 million in cash now forms part of Singapore’s financial reserves, which the Government invests “to grow for the benefit of Singaporeans”, she said.

Singapore uses up to 50 per cent of the long-term expected real returns on the investment every year in its annual budget, or what is known as the Net Investment Return Contribution (NIRC). The rest of the actual returns are reinvested. 

“This rule strikes a balance between the needs of current and future generations of Singaporeans. 

“It preserves the real value of our reserves and assures us of a rainy-day fund in the event of future crises,” she said.


For the land that was sold, the State holds “ultimate title” to the land. It automatically reverts to the State and becomes past reserves again once the 99 years is up.

“When that happens, there is no net increase in our reserves either. This is because the reversionary interest in that parcel of land had all along formed part of our past reserves,” she said.

The financial proceeds earlier received were to make up for the State’s loss of the use of the land for 99 years, not for the State giving up the land forever, she further explained.

“Thus the answer to Mr Leong’s first question is: There is no net increase in the reserves when state land is first sold and the sales proceeds are transferred to the financial assets. It is just a conversion of one asset form to another,” said Ms Indranee.

“There is no net increase in the reserves when land returns to the State after the lease expires, as the value of the lease did not include the value of the reversionary interest.

“There is again no increase in the reserves when the land which was returned to the Government is sold again. As before, that is merely a conversion of one form of asset to another.”

However, there is an increase in reserves when the Government invests and grows the financial assets, she said. 

“This is the outcome of careful and prudent management of our reserves by this Government and should not be taken for granted.”


Ms Indranee also said that when the Government needs to acquire land for public housing, it compensates the landowner for its value. Since 2007, the compensation is based on fair market value, she said.

This compensation may be funded from past reserves or government revenues. Land acquisition through the Selective En bloc Redevelopment Scheme (SERS), for instance, is funded by past reserves. 

HDB then purchases the land from the Government at fair market value.

“Why don’t we simply transfer the land to HDB at zero cost since it is a transaction between the Government and a government agency?” she asked.

The transfer to HDB for developing public housing results in the land being taken out of the past reserves. 

If there is no compensation, there will be no financial asset to replace the physical asset, and no land sale proceeds to invest and generate returns for the NIRC, said Ms Indranee.

“Requiring HDB to pay fair market value for the land cost thus preserves the value of our past reserves for the benefit of all Singaporeans, both present and future,” she added.


When HDB sells flats to Singaporeans, it does so at a discount from fair market value to keep flat prices affordable, said the minister. The difference between the fair market value and HDB’s posted price is the market subsidy. 

In addition, the Government provides “generous grants” to eligible applicants, to purchase flats below HDB’s posted price.

Because of these grants and subsidies, HDB’s effective selling price is usually much lower than the total cost of development, which results in a revenue shortfall, Ms Indranee said.

This shortfall is covered by a government grant to HDB which is funded by NIRC and taxes, which she emphasised are paid not only by Singaporeans but also by permanent residents, foreigners working and living in Singapore, tourists and companies and other tax-paying entities.

“The Government does not profit from the sale of State Land developed into public housing; there is no triple payment by Singaporeans for State Land used for public housing,” said Ms Indranee.


She then turned to another parliamentary question by Leader of the Opposition and Workers’ Party chief Pritam Singh.

Mr Singh (WP-Aljunied) had asked whether HDB will provide a breakdown of the total development cost of BTO flats and the value of the subsidies applied to them.

The question was raised in view of the recent Protection from Online Falsehoods and Manipulation Act (POFMA) correction direction issued to Mr Yeoh Lam Keong, a former chief economist of Singapore sovereign wealth fund GIC, over his comments on HDB’s deficits and Singapore’s past reserves.

The Ministry of National Development (MND) said last month that Mr Yeoh's Facebook posts falsely convey that HDB will not incur a loss of about S$270 million from the Central Weave @ Ang Mo Kio Build-to-Order (BTO) project, and that the Government is free to sell state land at nominal or much lower cost than its fair market value.

“HDB does not price new flats to recover the cost of land and construction. Instead, it prices flats significantly below market value using generous subsidies to ensure they are affordable to Singaporeans," said MND.

This is indisputable, Ms Indranee said on Monday, pointing to the reasons she laid out earlier. 

“It is also confirmed by the fact that the vast majority of first-timer families are able to buy new BTO flats in non-mature estates, and service their monthly mortgage instalments using their CPF, with zero or minimal cash outlay," she added.

“Finally, it is evident from HDB’s audited financial statements which are publicly available.”

HDB’s annual report showed that for the financial year ending in March 2022, it recorded a deficit of S$3.85 billion in its home ownership programme. 

The average deficit incurred by HDB in the last three financial years was about S$2.68 billion a year, noted Ms Indranee.


Mr Singh then pressed Ms Indranee to respond on whether HDB will be providing a “clear breakdown” of the development costs of BTO projects.

She replied: “Should we give the total development costs? The answer is that we don't think that anything would be achieved by doing so. 

“And the reason is this: What is the real important thing to Singaporeans? The real important thing is are you able to afford a flat … and every Singaporean who buys a BTO knows that actually the price that they are paying is less than what you would have to pay if you were paying a pure market price. 

“That's why BTOs are so popular. Otherwise, you would buy resale.”

Different places will have different pricing and different subsidies, and a breakdown of costs “is not meaningful” or helpful, she said.

She also pointed out that Mr Singh’s question did not really co-relate to the POFMA correction direction, which was about the net loss for one BTO project and not development costs.


In response, Mr Singh said he wanted to “suggest” how an answer could be meaningful, by way of two supplementary questions.

Since the introduction of Prime Location Housing (PLH) flats last year, Mr Singh said he felt that perhaps a detailed publication of HDB subsidies was “warranted”.

This was because one of the conditions attached to the flats was a clawback of the subsidies given to the flat buyers when they sell it after the 10-year minimum occupation period.

“Another reason I would suggest to the minister to publish the dollar value of the subsidy is to scrutinise and track the amount of subsidies being diverted for home ownership purposes,” he said. 

After MND decided in 2011 to delink BTO prices from prices in resale market, the median prices of flats has risen.

With resale prices reaching “record highs” today, increasing the size of HDB subsidies would appear to be the main way through which BTO prices will be kept affordable, said Mr Singh.

“In view of these new reasons, what is preventing HDB from publishing the dollar value of HDB subsidies for new BTO flats?” he asked.

Ms Indranee said that Mr Singh's point about the PLH scheme “doesn't really change my answer”. 

“At the end of the day, the question is: What is affordable to the person who's buying, and we have made no secret of the fact that for prime location housing, you will have to have a greater subsidy,” she said. 

“So it comes back to the same question: Why would you have to disclose or put out the development costs of every single project? It’s just not meaningful.”

Mr Singh also asked another question on the HDB affordability index and why it covers only non-mature estates. 

HDB had stated that the price-to-income ratio for BTO flats offered in non-mature estates is around five or less, which means the purchase price is around five times one’s annual income or the mortgage is around 25 per cent of one’s salary.

On this, Ms Indranee asked Mr Singh to file a separate parliamentary question on why HDB does not publish this for mature estates, so she could be sure of the accuracy of her answer before responding.

She asked him to do the same for other supplementary questions he asked on reclaimed land, including how the State values reclaimed land and if this value goes into current reserves.

Source: CNA/hm(gs)


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