Percentage of Land Cost in Actual Prices of BTO Flats Constructed in 2016 and 2017
Ministry of National DevelopmentSpeakers
Summary
This question concerns Mr Muhamad Faisal Bin Abdul Manap’s inquiry regarding the land cost percentage in total development costs for BTO flats built in 2016 and 2017. Minister Lawrence Wong stated that land cost averaged 60% of development costs for 3-, 4-, and 5-room flats, though flats are priced for affordability rather than cost recovery. He highlighted that HDB incurred an average annual deficit of $1.14 billion from FY2015 to FY2017 to ensure public housing remains accessible to citizens. Minister Lawrence Wong clarified that HDB pays for land at prices set by the Chief Valuer, with proceeds directed to past reserves for national budget support. Finally, he noted that construction costs are set via public tenders while land proceeds support the Budget through Net Investment Return contributions.
Transcript
8 Mr Muhamad Faisal Bin Abdul Manap asked the Minister for National Development what is the percentage of the land cost out of the actual cost price for a three-room, four-room, and five-room type Build-To-Order (BTO) flat constructed in 2016 and 2017.
The Minister for National Development (Mr Lawrence Wong): Mr Speaker, the cost of building HDB flats includes the cost of land, construction, consultancy fees, financing and other project-related costs. The proportion of land and construction cost for individual projects will vary from project to project, depending on specific site, design and market conditions, as well as other factors affecting land and construction cost. For projects that were awarded in 2016 and 2017, the land cost was about 60% of total development cost, and this percentage was about the same across 3-, 4- and 5-room flat types.
In general, HDB’s total development cost cannot be fully covered from the sale price of the flats. This is because the pricing of new HDB flats is guided by our objective of keeping public housing affordable. That is why in the last three years, from FY2015 to FY2017, HDB incurred an average annual deficit of about $1.14 billion per year for its Home Ownership Programme.
Mr Leon Perera (Non-Constituency Member): Just a point of clarification to the Minister. The Minister mentioned 60% is the average cost borne by the HDB, on average, in 2016/2017. Just to confirm, for land cost, does that mean cost that is paid to the Singapore Land Authority by the HDB?
Mr Lawrence Wong: Mr Speaker, that is correct. We have a robust and transparent process for the purchase of land and also for construction. Essentially, HDB, as a developer, is treated like any other developer with regard to land sales. And as Mr Leon Perera and other Members would appreciate, land sales are governed under the Constitutional rules for the protection of reserves. So, the sale of land is benchmarked at a price set by the Chief Valuer, and land proceeds go on to past reserves and we use a share of that through the Net Investment Return contributions that come to the Budget every year.
On the construction side, HDB will put up a tender and the tender will set the basis for the construction cost.