Light at the end of the privatisation tunnel

It has been an 18-year wait for the residents of Braddell View for the privatisation of their HUDC estate. The other 17 estates had taken just two to three years to complete their privatisation processes - all largely painless. But the story is a little different for Braddell View, the last such estate standing.

What has stalled Braddell View's progress has been a "historical quirk" that needed to be fixed, the need to "harmonise" the leases of two separate plots of land that make up the estate.

The sprawling 106,120 square-metre development is the only HUDC estate completed in two phases. It thus sits on two land parcels under two state leases, each with different expiry dates that are precisely two years, two months and 27 days apart.

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The long-drawn process has seen the management committee go through seven chairpersons and three members of parliament of the Bishan-Toa Payoh GRC: Leong Horn Kee, Hri Kumar Nair, and Chee Hong Tat.

In an interview with The Business Times, Alex Teo, the seventh chairperson of the management committee, said: "I believe we are at the tail end of the whole process. I think pretty soon the announcement will come."

The committee has applied to the Singapore Land Authority (SLA) for the creation of a strata title scheme for this estate.

What finally catalysed the process was an amendment to the HUDC Housing Estates Act, proposed by then Minister of State for National Development Lee Yi Shyan, and passed in parliament in 2012.

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It proposed to give the Braddell View management committee the flexibility to apportion the cost between residents based on two different lengths of lease.

This means that not every resident will have to pay the same amount. It allowed residents with the shorter lease to top up their lease to align the expiry date with the longer lease of the other parcel.

After the Act was amended, the management committee held two extraordinary general meetings, where it was agreed that the payment would be apportioned in the ratio of six to four.

In 2015, the chief valuer at the Inland Revenue Authority of Singapore assessed the lease top-up premium to be about S$8.6 million.

Phase One residents thus had to pay about S$12,000, compared to Phase Two residents who paid about S$8,000. Residents also agreed to use the sinking funds to subsidise some of the payment of the premium.

Asked how the residents are now feeling, Mr Teo said: "A bit tensed." He added that anything can happen, and nothing is confirmed until it is in black and white - referring here to the receipt of the Subsidiary Strata Certificate of Title.

His worry is not unfounded. SLA has updated that it has received a notice of objection from one of the units. It is studying the objection and will reply to the objector directly.

Partners from law firm Kennedys Legal Solutions, Christopher Yong and Patrick Ee, who assisted in the privatisation process, think that it is unlikely that the committee will have to call off the privatisation and start from scratch.

This is because more than 80 per cent of the flat owners have consented to the privatisation, so there is "a healthy buffer" from the statutory 75 per cent required. All the statutory requirements have also been fulfilled, they said.

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Asked about the residents' plans should the privatisation go through, Mr Teo said that unlike other former HUDC residents, they are not looking for an en bloc sale.

This is because the residents like the estate. It is near three MRT stations: Braddell, Caldecott and Marymount, as well as good schools such as Ai Tong School, Catholic High School, Raffles Institution and the soon-to-be completed Raffles Girls' School campus.

An upgrade to the facilties in the ageing estate would be nice however, Mr Teo said. He has an idea to engage a developer to work with the owners to spruce up the amenities without actually buying over the whole premise, but the lawyers tell him that it may not be allowed under current legislation unless he has a 100 per cent support from all the residents. Even if he did, this is not a common commercial practice for profit-seeking developers.

It is just as well. Property consultants say that given the scale of the project, obtaining the required consensus for a collective sale will be "a mammoth task".

JLL's Singapore research head Tay Huey Ying said: "From the developers' point of view, at a plot ratio of 2.1, the site can yield more than 3,000 apartments. Selling all of these within five years of land acquisition to avoid additional buyer's stamp duty (ABSD) will pose a challenge. This could greatly deflate the price developers are prepared to pay for the site and widen the gap in price expectations between sellers and buyers."

The Braddell View site is even larger than the 840,048 square foot (78,043 square metre) Farrer Court, which was eventually sold en bloc for a record S$1.34 billion. The sale occurred before the introduction of the ABSD ruling requiring developers to finish selling all their units in a project within five years to qualify for ABSD remission.

Today, the Farrer Court site has been redeveloped into the 1,715-unit d'Leedon, and still has unsold units, more than six years after its first launch.

Nicholas Mak, executive director at SLP International, added: "Few developers have the means, appetite and patience to develop such a large site."

Even if developers were to form a consortium to buy the site and then split it between themselves, it would be difficult to apportion the land because there will always be one plot that is more attractive than the other, he added.

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HUDC estates were built in the 1970s through 1980s as more upmarket public housing for the sandwiched middle class. By the late 1980s, there were 18 estates offering 7,731 units. It ended when the response to its completed flats started to dwindle.

In 1995, HDB announced the privatisation programme for HUDC estates to allow home owners control of their estates. Seventeen of the 18 HUDC estates have completed their privatisation processes.

Last year, the privatised Shunfu Ville HUDC estate in Bishan was sold to Qingjian Realty for S$638 million, while Raintree Gardens in Potong Pasir was sold to UOL and United Industrial Corp for S$334 million.

A number of privatised HUDC sites are known to have initiated or re-initiated collective sale discussions, including Eunosville, Serangoon Ville, Rio Casa (formerly called Hougang N3 HUDC) and Florence Regency (formerly called Hougang N7 HUDC).

This article was first published on Mar 13, 2017.
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