No ‘triple payment’ for land used to develop HDB flats: Indranee Rajah

No ‘triple payment’ for land used to develop HDB flats: Indranee Rajah

SINGAPORE: There is no “triple payment” by Singaporeans for the land used to develop HDB flats, said Second Finance Minister Indranee Rajah in Parliament on Monday (Nov 7).

She was replying to parliamentary questions from Non-Constituency Member of Parliament Leong Mun Wai, who had asked for the cost of state land used for public housing when initially acquired by the Government.

He had also asked for the difference in the higher land cost when the Housing and Development Board (HDB) bought the land for development versus when the Government initially acquired the land.

A third question relates to whether taxes to cover the difference then amount to “triple payments” for use of state land that are developed into HDB flats, if the land acquisition and development occurred in two different terms of Government.

Ms Indranee, who is also Second Minister for National Development, emphasised that when state land is sold, a physical asset is converted into a financial asset, and there is no net increase in the reserves with this transaction.

She explained that under Singapore land laws, which can be traced back to English land laws, all title to land in Singapore is derived from the State and the state leases the land to others.

The leases confer ownership and possession of those lands to these individuals only for the duration of the lease, and it reverts to state ownership after that period.

Under a 99-year lease, the State still holds the land “for perpetuity” after the 99 years is up. This is referred to as “reversionary interest” or future right to the land. 


Land that was not leased out by the state remains state land, and under Singapore’s Constitution, all state land forms part of the country’s reserves.

“For example, if we sell a parcel of state land at its fair market value of, say, S$1 million, we no longer have the land for the term of the lease sold, but we have S$1 million,” said Ms Indranee.

“We have merely changed the physical land in our reserves into an equivalent amount of financial reserves. There is no new value created and hence no addition to the reserves.”

The S$1 million in cash now forms part of Singapore’s financial reserves, which the Government invests “to grow for the benefit of Singaporeans”, she said.

Singapore uses up to 50 per cent of the long-term expected real returns on the investment every year in its annual budget, or what is known as the Net Investment Return Contribution (NIRC). The rest of the actual returns are reinvested. 

“This rule strikes a balance between the needs of current and future generations of Singaporeans. 

“It preserves the real value of our reserves and assures us of a rainy-day fund in the event of future crises,” she said.


For the land that was sold, the State holds “ultimate title” to the land. It automatically reverts to the State and becomes past reserves again once the 99 years is up.

“When that happens, there is no net increase in our reserves either. This is because the reversionary interest in that parcel of land had all along formed part of our past reserves,” she said.

The financial proceeds earlier received were to make up for the State’s loss of the use of the land for 99 years, not for the State giving up the land forever, she further explained.

“Thus the answer to Mr Leong’s first question is: There is no net increase in the reserves when state land is first sold and the sales proceeds are transferred to the financial assets. It is just a conversion of one asset form to another,” said Ms Indranee.

“There is no net increase in the reserves when land returns to the State after the lease expires, as the value of the lease did not include the value of the reversionary interest.

“There is again no increase in the reserves when the land which was returned to the Government is sold again. As before, that is merely a conversion of one form of asset to another.”

However, there is an increase in reserves when the Government invests and grows the financial assets, she said. 

“This is the outcome of careful and prudent management of our reserves by this Government and should not be taken for granted.”


Ms Indranee also said that when the Government needs to acquire land for public housing, it compensates the landowner for its value. Since 2007, the compensation is based on fair market value, she said.

This compensation may be funded from past reserves or government revenues. Land acquisition through the Selective En bloc Redevelopment Scheme (SERS), for instance, is funded by past reserves. 

HDB then purchases the land from the Government at fair market value.

“Why don’t we simply transfer the land to HDB at zero cost since it is a transaction between the Government and a government agency?” she asked.

The transfer to HDB for developing public housing results in the land being taken out of the past reserves. 

If there is no compensation, there will be no financial asset to replace the physical asset, and no land sale proceeds to invest and generate returns for the NIRC, said Ms Indranee.

“Requiring HDB to pay fair market value for the land cost thus preserves the value of our past reserves for the benefit of all Singaporeans, both present and future,” she added.


When HDB sells flats to Singaporeans, it does so at a discount from fair market value to keep flat prices affordable, said the minister. The difference between the fair market value and HDB’s posted price is the market subsidy. 

In addition, the Government provides “generous grants” to eligible applicants, to purchase flats below HDB’s posted price.

Because of these grants and subsidies, HDB’s effective selling price is usually much lower than the total cost of development, which results in a revenue shortfall, Ms Indranee said.