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No inconsistency in EC policy

Mr Mun Cheong Fai and Mrs Joanne Tan raised several queries on the financing and debarment period under the executive condominium (EC) policy. (“Policy inconsistency hitting a group of HDB owners”, “Set lower priority, not 30-month wait, for 2nd EC buy”; Nov 14)

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Christine Yap, Director, Corporate Communications, Ministry of National Development

Mr Mun Cheong Fai and Mrs Joanne Tan raised several queries on the financing and debarment period under the executive condominium (EC) policy. (“Policy inconsistency hitting a group of HDB owners”, “Set lower priority, not 30-month wait, for 2nd EC buy”; Nov 14)

When the Monetary Authority of Singapore introduced the 60 per cent Total Debt Servicing Ratio limit in June last year, a decision was made to exclude the existing mortgage obligations for a Housing and Development Board (HDB) flat of a new EC buyer or an HDB flat buyer, so as not to impede upgraders. This was because such buyers are required to dispose of their existing flat within six months of taking possession of their new EC or HDB flat.

Also, a 30 per cent Mortgage Servicing Ratio limit on ECs was implemented in December last year to discourage EC buyers from overstretching their finances. This limit does not consider potential sales proceeds from existing property, in line with the industry practice for housing loans, as the exact sales amount cannot be ascertained until the sale has been completed.

If necessary, buyers can obtain a bridging loan from banks to help finance some portion of their EC purchase while awaiting the proceeds of their current flat.

Mr Mun also asked about the resale levy imposed on second-timer EC buyers. We wish to clarify that the levy is required for second-timer EC owners who buy EC units directly from developers, as they would have enjoyed lower prices relative to equivalent private developments, due to the eligibility and ownership restrictions on EC purchases.

This ensures a fairer distribution of subsidies between first-timer and second-timer households, and is similar to the treatment of second-timer applicants who buy flats directly from the HDB.

On Mrs Tan’s query regarding the 30-month debarment period imposed on former EC owners, we wish to explain that as ECs will eventually become full-fledged private housing after 10 years, the debarment period is in line with the treatment for other private property owners. This restriction also helps ensure that first-timer EC buyers are given priority.

We thank Mr Mun and Mrs Tan for their feedback and the opportunity to clarify the EC policy.

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