ST : HDB sticking with build-to-order scheme

Feb 23, 2010

HDB sticking with build-to-order scheme

By Jeremy Au Yong

THE build-to-order (BTO) scheme introduced in 2001 by the Housing Board has reduced uncertainty for both flat buyers and the Government.

Applicants are now in a good position to plan for when they will get their flats, while the Government has a better gauge of demand.

National Development Minister Mah Bow Tan made these points in Parliament yesterday when responding to Madam Ho Geok Choo (West Coast GRC). She had asked if the Government would consider reverting to the previous Registration for Flat System.

Under that system, the HDB would build flats according to the number of applicants on its waiting list.

For the BTO scheme, however, flats are built only when there is sufficient take-up of flats in a project and down payments have been made. The HDB uses 70 per cent as a guide for the required take-up rate.

Mr Mah said the old system led to a situation in the 1990s when the Government was at one point left with 31,000 unsold flats. 'HDB took five years to clear its stock of unsold flats. Having such a large stock of unsold flats is a waste of public money,' he said.

This happened because under the old system, it was difficult to discern how much of the demand was genuine.

Mr Mah said: 'You are anticipating demand based on the length of the queue, and you don't know whether that is genuine demand or not because there is no commitment to buy.'

At the height of the property boom in the mid-1990s, there were about 150,000 applicants on the HDB's waiting list. The waiting time was between six and seven years. Then, in the wake of the Asian financial crisis in 1997, applicants dropped off the list and the HDB found it had no buyers for the flats.

Mr Mah said that with the BTO system now in place, the average waiting time for buyers was around 31/2 years: Processing applications and administrative work could take up to six months, and construction would take three years.

The main cause of delays in previous years - applicants having to wait for a successful ballot - has also been addressed as there has been an increase in construction. The HDB announced plans to build some 12,000 flats this year.

'Under the current speed of rolling out BTO projects, which is once a month now, the chances of the person being successful is actually very high,' Mr Mah said. He added that the vast majority of those applying for BTO flats in non-mature estates succeed within two tries.

Asked by Madam Cynthia Phua (Aljunied GRC) and Mr Yeo Guat Kwang (Aljunied GRC) if the stipulation, that roughly 70 per cent of a project must be sold before construction can start, added to the delay, Mr Mah said this hurdle was often easily cleared. 'This hurdle rate of 70 per cent is not difficult to achieve. On the other hand, it does give us fairly comfortable assurance that if we proceed to build, there will not be oversupply,' he said.

According to the HDB, since the BTO scheme began, only four projects did not draw enough buyers.



Punggol Vista BTO flats under construction. Under the BTO scheme, flats are built only when there is sufficient take-up and down payments have been made. -- ST PHOTO: ALPHONSUS CHERN