HDB helping in DBSS buyer's pull-out appeal

Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
#1
Jul 9, 2011
HDB helping in DBSS buyer's pull-out appeal

No longer eligible to buy flat, she has to pay 20% penalty for backing out
By Daryl Chin

THE Housing Board (HDB) is helping in a flat buyer's appeal to reduce a hefty penalty payable for backing out of the purchase of a Design, Build and Sell Scheme (DBSS) unit in Ang Mo Kio.

The penalty amounts to 20 per cent of the purchase price of $610,000 - four times the 5 per cent penalty payable for normal build-to-order (BTO) flats.

Market experts say the case highlights another quirk of the DBSS, which allows private developers to freely price the public housing units they build and attach their own conditions to their sale.

Ms W.L. Teoh, a 29-year-old marketing manager, first signed on the dotted line with her fiance two years ago for a five-room unit for $610,000.

However, the couple broke up soon after, making them automatically ineligible for the flat they bought.

Under the HDB's Fiance/Fiancee scheme, engaged couples can buy new HDB flats, including DBSS units, but must produce a marriage certificate within three months of taking possession of the flat.

'When we decided not to go ahead with the marriage due to personal reasons, we were hit with an absurd penalty amount,' she told The Straits Times.

Under the terms and conditions of the sale, their deposit of 20 per cent of the purchase price would be entirely forfeited. With the inclusion of interest, stamp duty and legal fees already paid, the loss amounts to more than $140,000.

This is four times the 5 per cent penalty payable in the case of BTO flats.

Checks with other private sector developers revealed that a 20 per cent penalty was the norm for any private sector development project.

Said one DBSS developer, who did not want to be named: 'Once awarded the land, we have to pay the Government more than 20 per cent of the bid amount within a month. If we are taking all the risk, then naturally we need to protect our interests as well.'

In Ms Teoh's case, the trouble was that, unlike private property buyers, DBSS home buyers do not have the option of reselling flats they no longer want to another buyer.

HDB rules prohibit such sales and stipulate that flat buyers must live in the dwelling they bought for at least five years. The higher 20 per cent penalty, coupled with the inability to resell, is why buyers like Ms Teoh are caught in a bind.

Ms Teoh said she was offered a chance to purchase the flat under a different scheme. For instance, the buyer can choose to go through with the purchase with eligible family members.

However, in Ms Teoh case, both her parents were no longer eligible, leaving her with little choice but to pay the penalty.

While developers were reluctant to share the number of people who back out at the last minute, one said it was about 'one in every 30 applicants'.

'It's a three-year wait for completion of the flats and anything can happen,' the developer explained.

Commenting on the case, Chesterton Suntec International's head of research and consultancy Colin Tan said: 'DBSS flats are not considered private property, so paying the full penalty is not quite right. Regulating penalties for such projects is something the Government should consider.'

PropNex chief executive Mohamed Ismail added: 'The disparity lies in the fact developers treat this as a purely private development, rather than one that is subjected to HDB criteria. First-timers unfamiliar with these differences might not have known what they were signing up for.'

Responding to queries, HDB said yesterday that DBSS buyers are always informed upfront of the terms and conditions before they sign the agreement, which is between them and the private developer.

'This would include the 20 per cent penalty for flat cancellations, which is a standard market practice,' it said.

But HDB is nevertheless appealing to the developer on Ms Teoh's behalf to explore possible options and The Straits Times understands there is a meeting to discuss this next week.

The DBSS was first introduced in 2005 to give private developers a chance to participate in the public housing market and to introduce more building and design innovations compared to standard flats.

So far, 13 sites have been awarded and 5,500 flats, which make up less than 1 per cent of HDB's total stock, have been built and sold.

They come with better quality finishes but do not have facilities such as the swimming pools typically found in condominiums.

Last month, a public furore erupted when the latest DBSS project in Tampines was launched with flats priced up to $880,000 - almost twice the price of similar-sized BTO flats in the same town.

This led to critics questioning the continued relevance of the scheme. Since then, National Development Minister Khaw Boon Wan has halted the sale of

DBSS plots and put the scheme under review.

Yesterday, his ministry said that a DBSS land sales tender at Sengkang that was originally scheduled for closure on July 20 has been withdrawn.

It added that no new DBSS site will be released for sale until the DBSS review has been completed.

darylc@sph.com.sg

My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
Reply
#2
The DBSS scheme looks really crappy. Buyers choose to pay nearly the price of a private property, and subject themselves to all the restrictions imposed by HDB. A combination all the cons of HDB and private property with no benefits?
Reply


Forum Jump:


Users browsing this thread: 2 Guest(s)