Sunday, March 14, 2010

New PR limits may hit Indian flat sellers

Mr Mohamed Mustafa Shahulhamid has been looking for a resale flat in Little India for his son in the last six months.

So far, his hunt has been fruitless.

‘Many Indian families want to live in Little India. No Indian families are moving out and we cannot buy from the Chinese,’ said the 51-year-old frozen food trader.

Under the Ethnic Integration Policy, the Government has set ratios for ethnic groups in HDB blocks and precincts. This is to prevent enclaves from forming.

In Little India, the quotas for Indians/Others are usually filled.

But Mr Mohamed Mustafa may now get a break as a result of quota changes. On March 5, the quotas for Indians/Others were raised to 12 per cent and 15 per cent for precinct and block respectively, up from 10 per cent and 13 per cent.

The corresponding quotas remain unchanged for the Chinese (84 per cent and 87 per cent) and Malays (22 per cent and 25 per cent).

Is this change a boon for Indian buyers and sellers?

It is unclear at this point, said estate agents, because another quota has also come into play.

On March 5, the HDB also announced quotas for permanent residents (PRs), set at 5 per cent and 8 per cent for precinct and block respectively.

Previously, an Indian seller could also rely on PRs to make up for any shortfall in potential Indian buyers, if the Chinese and Malay quotas had been reached in a block or precinct.

But with the PR quotas, the pool of buyers could become smaller, said Mr R. Subra, managing director of SKV International Property Consultants.

‘The new limits for PRs may nullify any upside from the ethnic quota change,’ he noted.

Already, Indians are selling their homes at a few thousand dollars – or up to 10 per cent – below the average transacted prices of a similar flat type in the same neighbourhood, said Dennis Wee Group agent Jason Sim.

This is true of areas like Sembawang and Woodlands, where the Chinese quotas are maxed out, he said.

Take the case of retiree K. Omar, who had Chinese buyers offering up to $25,000 cash over valuation for his four-room flat in Bukit Ho Swee. But they could not close the deal because the Chinese quota in his block had already been met.

Mr Omar, 65, took a year before he sold the flat at the valuation price of $430,000 last November. The buyers were a Vietnamese couple.

But the revised Indian/Others quotas offer potentially good news for Indians eyeing areas such as Race Course Road.

One reason such places are popular is that they are near temples.

In these districts, Indians have often found it hard to buy a resale flat because the quotas were already filled, and not many Indians or Eurasians wanted to sell their homes in the first place.

Industry experts said the effects of the new changes will be seen only in a couple of months.

For now, the search for a flat continues for Mr Mohamed Mustafa.

‘The raised quota may not help,’ he said, adding that he may consider areas like Toa Payoh, Thomson and Paya Lebar.

Source: Sunday Times, 14 Mar 2010

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