Behind the drop in HDB arrears

November 30, 2009
Singapore Democrats

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Jufri Salim

A majority of Singaporeans live in HDB flats which are owned by the Government. These flats are leased on a 99-year period or they are rented out on a shorter-term basis.

The Straits Times recently reported (below) that the number of those in arrears of their monthly instalments has decreased from 33,670 last year to 30,770 this year, a drop of nearly 3,000 (see report below).

The report seems to make us believe that our nation’s economy is improving and the folks are having it easier despite the on-going recession.

The HDB says that it gives alternatives such as deferring of payments, financial counseling and ‘interim housing’. For deferment of arrears payment, HDB allows a 6-month window for home owners to settle their arrears without any late charges and penalty fees.

While it is true that any late payment charges and penalties during that six months will be waived, the monthly installments will increase with immediate effect thereafter. Therefore, you are paying more on monthly basis after the deferment period.

They will call you up dozens of times a week just to get confirmation from you that you are able to pay. In some cases, HDB officers will come knocking on the door imitating the likes of loansharks.

And if you are in financial difficulties, you are to come to any branch office for counseling where they will fix plans to settle your arrears. The most common plan is the suggestion to rent out a room or two.

They will also suggest housewives going to work and working part-time just to earn more to settle the mounting debts. If both parties are unable to come into any agreement, the ultimatum is: Pay up or ship out.

These threats are not uncommon. Repossession of the flat is a known weapon which many fear.

Many of those affected rent out the entire flat and stay outdoors. Many are also made homeless when their flats are repossessed. Could these be among the causes families living on the beaches and parks?

HDB also suggests selling your flat and downgrading to a smaller one, and use the profit to offset any outstanding arrears. In this way, you are not a burden to them anymore. You can also get a loan from banks.

But this doesn’t end the problem because lessees now owe the bank which can also be very menacing when chasing arrears.

HDB reported a $2-billion deficit in its latest report before Government grants. Another report on the same day highlighted arrears owed to it.

This is misleading as HDB “buys” land from the Government at a reduced amount from market rates. In the end the Government still makes tons of money from HDB lessees. But to imply that the HDB deficits come from the arrears is not true.

While the PAP Government continues to build casinos and elite shopping malls at Marina Bay that cater to the rich, the poor and needy in Singapore are not at all a concern to it.


Jufri Salim is
Vice-President of The Young Democrats.

 

HDB loan arrears down
Defaults stemmed by slew of measures, says HDB in annual report
Jessica Cheam
Straits Times
3 Nov 09

Despite the recession, the number of HDB home loan arrears fell from 33,670 in September last year to 30,770 during the same month this year.

The drop follows the Housing Board’s introduction of a raft of measures at the outset of the financial crisis to aid owners at risk of defaulting on their home loans.

The measures, announced in February, included a mix of short- and long-term initiatives such as deferring payments, counselling and – as a last resort – compulsory acquisition.

The HDB also introduced the new concept of ‘interim housing’, intended for those who may need to urgently downgrade, but have bought a new flat that has yet to be completed.

Departing from its usual practice, the HDB started extending second concessionary loans to downgraders on a case-by-case basis.

Taken together, the measures led to a decline in the default rate from 7.9 per cent of 426,270 loans in September last year, to 7.5 per cent of 409,470 loans for the same month this year.