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Thursday 25 June 2015

HDB'S DESIGN, BUILD & SELL SCHEME

Instead of being appreciated for putting a stop to the DBSS (Design Build Sell Scheme) offered by the HDB, Minister Khaw Boon Wan now become the target of attacks for the recent spate of troubling news related to the scheme.
To be fair, all these projects were already ongoing before Minister Khaw took over the ministry from his predecessor Mah Bow Tan. The spiraling prices asked for by developers tasked with the scheme attracted particular concern of the minister who then made a quick decision to suspend the scheme indefinitely.
The scheme was introduced in 2005 to offer home buyers an additional choice of housing and lifestyle preference on top of an already wide range of different offers.
It was a good scheme with good intention. What may have caused the scheme to go the wrong way could possibly be to a certain degree its speculative element.
The sites chosen by HDB to be tendered out were choicest locations, definitely better that those earmarked for BTO. Developers engaged private architects to come up with designs that equals any private developments. Units come renovated of which costs are built into the purchase price that in a way did away with additional renovation loan the buyer has to take up. Not forgetting that this is packaged inside HDB's financing scheme that we all know is much cheaper than commercial lending.
I have also speculated that this might be the former minister's intention to eventually turn these developments around somewhat like the HUDC of old and make them private.
When buyers felt that these flats can offer them a capital appreciation faster and at a cheaper outlay, they flocked to the scheme. That triggered developers to sense a strong and growing demand and eventually put in higher bids in upcoming tenders.
This is definitely a bubble getting bigger each day. HDB flats almost reaching a million bucks is in the making, and it simply don't make sense. Why so expensive?
Developers tendered land at at high price but buyers don't think there is any profit potential anymore. Selling price for the units began to fall but developers are still carrying the high cost so in order to mitigate the difference, they try to maximize the number of units and perhaps cut some costs on peripherals.
The problems that we now become so familiar with has to be borne by both developers and buyers proportionately.

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