HDB Does Not Price Flats to Recover Land and Building Costs
HDB, like any developer, incurs land and construction costs when it develops HDB flats. However, HDB does not price flats to recover costs. This is because the key consideration is to ensure affordability for flat buyers, especially for first-timers.
In pricing new flats, HDB would first establish the market value of the flat by considering the prices of comparable resale flats nearby, as well as the individual attributes of the flat (such as its storey height, orientation, location and accessibility to MRT stations and key amenities), and the prevailing market conditions. A significant subsidy is then applied to this assessed market value, so that new flats are priced below the market.
The Government is committed to helping citizen households own their first home. On top of pricing new flats at a significant discount to the market, HDB offers eligible first-time flat buyers the Enhanced CPF Housing Grant of up to $80,000. The housing grants are calibrated according to the flat buyers’ income, with more help provided to lower-income families.
With these subsidies, the vast majority of first-timer families can service their monthly mortgage instalments using their CPF, with little or no cash outlay.
Even if market prices were to move up, HDB will continue to price new flats affordably. HDB’s total development cost, which includes construction and land costs, and the CPF housing grants disbursed to eligible home buyers, cannot be fully covered by the sale prices of its flats. This is why HDB incurs a significant deficit every year for its Home Ownership Programme. The annual deficits, funded by Government grants, are reflected in HDB's audited financial statements, which are published annually.