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Explaining the Advantages of HDB Loans Versus Bank Loans (An Abridged Version)

Before 1 January 2003, people buying a HDB (Housing Development Board) flat have to finance it either with a HDB Concessionary Rate Loan or a HDB market rate loan. But since then the HDB market rate loan was replaced by home mortgage from financing institutions, which are gazetted by the Monetary Authority of Singapore.HDB Concessionary Rate LoanCompared to a home loan from a financing institution, a HDB loan has more stringent eligibility requirements. The below covers most of them.Eligibility Criteria:For HDB flats only (resale or direct purchase from HDB)
At least one buyer must be a Singapore citizen
Must have a gross monthly income not exceeding $10,000 (or $15,000 for extended families)
For DBSS flat the income ceiling is $8,000 (or $10,000 for extended families)
For applicants under the Single Singapore Citizen (SSC) scheme, the income ceiling is $5,000
Must not own any private residence (in Singapore or abroad), including HUDC and executive condominium
Must not have sold a private residential property within 30 months and taken a HDB loan before
Must not have previously obtained a HDB loan within 30 months
Must not have taken more than two previous HDB loans
Must not own more any market / hawker stalls or commercial / industrial property (Except if you operate the business yourself, have no other source of income, and only own one market / hawker stall or commercial / industrial property)From July 2013, HDB loan will not be granted for flats with less than 20 years of lease. In addition, for flats with lease between 20 and 59 years, loan approval and tenure will be subjected to certain conditions.Given the many restrictions of a HDB loan, why then do Singaporeans still want to take one? We delve further into the pros of this loan in the following sections.1. Higher CPF (Central Provident Fund) withdrawal limitFor financing by bank loans, the CPF Ordinary Account withdrawal cap is up to 100% of the valuation limit (VL), which is the lower of the purchase price or valuation at the time of purchase. If the loan is still outstanding when this limit is breached, the housing withdrawal limit can be increased to 120% VL provided that half (entire) of the prevailing Minimum Sum is set aside for borrowers below 55 (55 and above). This housing withdrawal limit varies with the purchase date of the flat, for purchases from 2008 onwards it is 120%.With a HDB concessionary loan, however, you can enjoy a higher withdrawal limit.For direct purchase from HDB, there is no limit to the saving in the Ordinary Account you can use.For resale HDB flats, there is no limit to the saving in the Ordinary Account you can use, after you have set aside half of the prevailing Minimum Sum.But from July 2013 onwards, for flats with leases between 30 and 59 years the use of CPF fund is allowed only if the remaining lease covers the buyer till at least 80. For such flats, the withdrawal limit will be computed based on the below formula:Withdrawal Limit= (The remaining lease of flat or property when the youngest owner is 55 years old / The lease of the flat or property at the point of purchase) x VLFor example, at the point of purchase the buyer is 38 years old and the lease is 40 years. When the buyer turns 55, the remaining lease will be 23 years. HenceWithdrawal Limit = 23/ 40 x VLTable 1 further illustrates what is VL.Table 1: VLFlat APurchase Price (S$) = 400,000Valuation (S$) = 350,000VL (S$) = 350,000Flat BPurchase Price (S$) = 370,000Valuation (S$) = 420,000VL (S$) = 370,000For flats with under 30 years of lease, use of CPF fund is prohibited. In other words, buyers will to cough up cash for the down-payment, monthly repayment of the loan, stamp duties and other miscellaneous fees.2. No cash component required for the down-paymentA key advantage of a HDB loan is that you do not have to stump up any portion of the down-payment in cash. You are allowed to use the balance in your CPF (Central Provident Fund) Ordinary Account to pay for it completely.Whereas with a bank loan, you will have to pay at least 5% of the Valuation Limit (VL) in cash. If the loan tenure exceeds 30 years or extends past the age of 65, the minimum amount jumps to 10%.3. Higher loan quantumFor the first HDB Concessionary Rate Loan you are taking, the loan quantum is as high as 90% VL. In contrast, for bank loans, the quantum is capped at 80% LTV (loan-to-value ratio). It dips to 60% if the loan tenure exceeds 30 years or extends past age 65.New regulations, that have kicked in from 12 January 2013, dictate that the mortgage servicing ratio (MSR) for private loans must not exceed 30% of the gross monthly income of the borrower and 35% for HDB loans.Effectively, this can translate into a lower loan quantum for a bank loan compared to a HDB loan.For example, for a 30-year loan with a 80% quantum for a S$800,000 HDB flat, at an interest rate of 1.5% p.a., the monthly repayment amount will be S$1,932.67. In order to be eligible for aHDB loan: Gross monthly income ≥ S$5,521.92
Private loan: Gross monthly income ≥ S$6,442.24Thus, if your income is below S$6,442.24, you will not be eligible for a private loan of 80% LTV. If you extend the loan tenure, current rules mandate that you can only take up to 60% LTV.Therefore, a HDB loan will allow a higher loan quantum.4. HDB is more lenient As a Government agency which main goals are to provide affordable quality housing and encourage home-ownership, HDB tends to be more tolerant of delinquent borrowers.But for a loan from a financing institution, you are always required to pay the monthly stipulated amount even if you have suffered a pay cut.Further, HDB usually grants deferment of monthly installment payment if you have fallen into financial hardship. The banks, on the other hand, will likely be hot on your heels if you defer payment even for a day!5. No penalty for partial or full repayment of loanOf note, is that HDB imposes zero penalty for partial or full repayment of its loan.Most mortgages of financial institutions, however, come with a lock-in period (aka commitment period) typically of 3-5 years. During this period, any repayment above the prior agreed amount will result in a penalty – usually at most 1.5% of the repayment amount. Financial institutions profit from the interest incurred on the loan, any partial or full repayment of the loan means a loss on interest earnings. Hence, the penalty helps to compensate for this loss.6. Stability in interest rateSince revision to the interest rate of a HDB loan is made quarterly in tandem with changes to the CPF rate, which has been the same for over 10 years. The interest rate has, likewise, remained stagnant. A HDB loan, thus, offers relatively more stability than even a fixed-rate mortgage which rate is only fixed for 3- 5 years. This is not saying that there have been no fluctuations in HDB interest rates. For instance, in the 1990s rates demonstrated more volatility.

Resilient Businesses Move Their People To The Cloud

Every year, as the Atlantic hurricane season approaches many businesses have a nagging realization that they are at risk due to a catastrophic “Black Swan ” event. Black Swan events are a constant source of risk in states like Florida where many communities are subject to disruption due to coastal storms. This risk is particularly acute for businesses that depend on the storage of on-line data if there is a chance their critical data could become lost or corrupted. But the threat from Black Swan events isn’t limited to Florida, nor is it limited to large scale disruptive events like hurricanes.The black swan theory or theory of black swan events describes a disruptive event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. The term is based on an ancient saying which presumed black swans did not exist, but the saying was rewritten after black swans were discovered in the wild. Consider the following scenario…”We tend to think of disasters in terms of the attacks on the World Trade Center, Hurricane Katrina, or other mega events. Sometimes, however, less notable events occur that can have a catastrophic effect on a business. In February 1981, an electrical fire in the basement of the State Office Building in Binghamton, New York, spread throughout the basement of the building setting fire to a transformer containing over a thousand gallons of toxin-laden oil. Originally thought to be PCBs, the toxins were soon determined to contain dioxin and dibenzofuran, two of the most dangerous chemicals ever created. The fire was smoky and quickly filled the 18-story building with smoke. As the transformer burned, the soot entered the buildings ventilation shafts and quickly spread toxic soot throughout the building. The building was so badly contaminated that it took 13 years and over $47 million to clean before the building could be reentered or used. Because of the nature of the fire, the building and its contents, including all paper records, computers, and personal effects of the people who worked there, were not recoverable. This type of event would be irrecoverable for many businesses.” – Operations Due Diligence, Published by McGraw HillWhat affect would a catastrophic hurricane that affected an entire region or a localized disruptive event like a fire have on the operation of your business? Could you survive that kind of interruption or loss? As the dependence on on-line data has grown in virtually every type of business, so has the risk that loss of their data could disrupt the operation of the business and even result in its complete failure. In response to these threats, there has been an evolution in the approaches used to mitigate these risks as the volume of on-line data has continued to grow. Originally, the concept of Disaster Recovery (DR) emerged as a mitigation strategy that focused on the recovery of critical data after a disruptive event by giving the business the ability to restore disrupted IT operations.Disaster Recovery (DR) involves a set of policies and procedures that enable the restoration of critical business data and allows the IT infrastructure to be restored to a prior state. DR was originally seen as the domain of the IT department who were given responsibility for mitigating the risk. To minimize the risk, system backups were scheduled frequently and aggressive DR plans that included server cold start procedures and data backups were implemented.The goal was to restore the infrastructure to the last point where the data had been backed up (at the time, typically on tape). The acceptable DR practices at the time allowed the IT system to be rebooted when the facility power was finally restored… Unless it was in a flood zone or the off-site backup storage facility had also been impacted. In either case, the operation of the facility could potentially be disrupted for some period of time and the data restoration was also potentially at risk depending on where backups were stored.Now let’s roll the calendar ahead… As technology evolved so did the Disaster Recovery strategies, which lead to new concepts that evolved to the requirements for a Business Continuity solution as a means of mitigating risk. Still seen as the domain of IT, as technology moved towards solutions like shadow servers, distributed data locations and high speed bulk data transmission with hyper connectivity. Data no longer had to be “recovered”, it just had to be connected in distributed locations where it could be remotely accessed. Business Continuity mitigated the risk of data loss and allowed a business to recover much more quickly and efficiently from a Black Swan event because its servers never went completely down.Business Continuity originally encompassed planning and preparation to ensure that an organization’s IT infrastructure remained intact enabling the business to efficiently recover to an operational state within a reasonably short period following a Black Swan event. Technology today has evolved towards cloud solutions that put both the data and the applications into remote “cloud” locations so it would seem the IT responsibility for mitigating the risk of on-line data loss or corruption has been solved. With highly connected, fully distributed solutions, some people feel the need for business continuity may be fading in criticality. Nothing could be further from the truth…The fact is the risk was never solely in the loss of the data but the loss of the businesses ability to operate. There are businesses that cannot tolerate any disruption to their operations. These include healthcare, insurance, and communications companies, critical logistic suppliers, transportation providers and local governments. It is during Black Swan events that the services and products these businesses provide may be most needed. The requirements of other, less critical businesses, whose operations could be interrupted for days or even weeks, but who might face a significant financial risk, may also make their continued operation a matter of corporate survival.Today’s technology has completely abstracted business processing and data from the user by moving critical IT infrastructures into the cloud. Cloud technology enables users to work from remote locations, but use of the cloud doesn’t fully mitigate operational risk. It means people have now replaced computers as the critical path to continued operations. The operation of the business is more likely to be interrupted because key personnel aren’t prepared to sustain operations during a Black Swan event. They don’t have a facility that has been proactively planned to support operations during disruptive events that could last for hours, days or weeks. Particularly in areas like Florida, where large natural disasters such as hurricanes can disrupt services to entire communities, resilient businesses need to prepare in advance for sustained operations during a disruptive event. The ability of a business to continue its operations during times of distress are a measure of the businesses resiliency.Business Resiliency: takes business continuity to another level because it makes it the domain of operations management rather than leaving it solely as the domain of the IT Department. When planning for disaster recovery or business continuity the critical link is now the people who are needed to operate critical systems remotely. Yes, there are occasions where staff can work from home or from remote facilities the business may operate, however, this is not always a satisfactory answer and even when it is, businesses often find themselves scrambling to play catch up, trying to figure out who does what and “how can we get it done under these circumstances” situations. During Black Swan events including regional disruptions like hurricanes or local disruptions such as fires, many of the people the business relies on may not have power, internet or even a phone needed to enable them to work from home. Because you can’t put people in the cloud, Business Resiliency requires planning, training and practice so that your staff knows how and when to mobilize.Resilient businesses integrate Black Swan response into their continuing operations so that, when they are needed, at a time when the business and the people are under stress, everyone knows how to respond efficiently and effectively and where to go to provide that response. Business resiliency requires a dedicated facility that has been hardened to withstand Black Swan events and has been designed to provide the support services the people and the IT infrastructure will both need. Business resiliency requires proactive planning and the integration of operating procedures into the businesses standard operating plans to include remote operations by trained critical staff who have been mobilized to respond during disruptive events and it requires proactive practice to ensure that, when remote operations are needed, the people are ready.

The Best In Class IT Consultant

IntroductionIn the fast moving and ever changing world of IT the ability of IT Managers and Practitioners to be truly effective consultants has never been greater.So what are the capabilities and attributes displayed by the very best IT Consultants? I believe they fall into seven categories as follows:1. Thought Leadership2. Client Knowledge3. Strategic Thinking4. Experience and Know How5. Problem Solving6. Relationship Management7. Change LeadershipIn looking at each of these seven key contributors to success in turn I have made the underlying assumption that the primary objective of the IT Consultant is to explore, reveal and extract the full commercial value within a client account. In other words it’s all about CLIENT INTIMACY.1. Thought LeadershipA Thought Leader is someone or a corporate entity, recognised to be a leader in their field. The outside world determines whether an individual or an organisation is a thought leader.Thought leadership is based on reputation. That reputation is based on the person’s or organisation’s understanding of its business, the needs of its customers, and the broader market-place in which s/he operates. Quite simply they are deemed to be pre-eminent in their area of expertise.To be a thought leader requires a spirit of generosity – generosity of time, intelligence and knowledge. It also requires the ability to philosophise, intellectualise and think ahead in order to push the boundaries of current thinking.Thought leaders are constantly hungry for knowledge and insights. They know where and how to find out about current best practices adopted by market-leaders. They know how to access information on emerging technologies, product/system updates and leading edge/”bleeding edge” thinking.They use this knowledge to be a catalyst for change, to challenge current thinking and to change existing paradigms. They apply their thinking to test out new hypotheses and to draw conclusions which they share openly, frequently putting at risk their reputation.Thought leaders know how to influence others through the use of different media to publish their thoughts. They know how to:- Cultivate the Press- Publish White Papers, Case Studies and Research/Survey Results- Submit Articles via Social Networks- Engage with Professional Groups and Communities- Obtain high level speaking engagements at Conferences/Trade Shows- Organise and lead Brainstorming EventsIn short, thought leaders give Thought Leadership the highest priority in their lives. They see Thought Leadership as a strategic imperative and are fully committed to it. They have an unswerving belief that they can make a difference in their chosen area of expertise.If you are going to be a Best in Class IT Consultant you must be dedicated to this task of Thought Leadership.2. Client KnowledgeWhen considering the difference they can make to their client’s situation the Best in Class IT Consultant engages in “outside in” thinking. In other words they start with a full understanding of the drivers of change surrounding their client. They understand that their expertise is one of many enablers of their client’s future success and that to fully leverage that expertise they need a full understanding of the client’s market-place and the client itself.Best in Class IT Consultants therefore take time to research the context in which they will be operating with a given client.When it comes to the client’s market-place they make sure that they fully understand:- The demands of its customers, now and in the future- Competitor threats facing the client- The threat posed by new entrants to the client’s market- The impact of substitute products and services which could undermine the client’s business- The power and influence that existing suppliers to the client exercise over the clientThey also research and understand the drivers of change in the client’s market including:- The Regulatory Environment- The state of the Economy- Social/Cultural trends- Adoption of new and leading edge Technologies in the market-place- The use of new routes to market being adopted by organisations in the client’s market sectorThe Best in Class IT Consultant uses this external research to identify and analyse the client’s current and likely future response to these drivers of change by finding out as much as possible about the client’s:- Vision- Objectives- Strategy- Current Resources- Structure- Systems- Employee Capabilities- Quality of Management- Style of Leadership- Current Values and CultureS/he then uses this understanding of the client’s current situation and preferred future situation to identify key issues which s/he could address with IT related solutions.Instead of starting with their technical expertise and thinking how they can work more productively with the client IN the client’s business they start with big picture thinking and spotting opportunities for helping their client to work ON the business for future success.This Outside/In thinking versus Inside/Out thinking enables them to have far more wide reaching discussions with their client, and thereby to differentiate themselves as someone who can bring long term added value to the client’s business.Best in Class IT Consultants see the importance of this bigger, wider, holistic approach to their client involvement.3. Strategic ThinkingA thorough understanding of the client’s big picture will lead the Best in Class IT Consultant into thinking about how best to help the client to come up with different IT strategies and options aligned to the overall strategy of the client’s organisation.To consider IT related strategic options the Best in Class IT Consultant takes time to understand the organisation’s overall strategy in its given market-place. S/he takes time to find out:- Where in the market-place will the client be focussing its efforts to gain long term competitive advantage- Its growth model, e.g. organic growth, acquisition, merger, disinvestment, joint ventures etc, and if the strategy for growth will be different in different geographies if the client is international/global- Its key differentiators, e.g. product quality, customised services, price, niche player, one stop shop etc, and therefore what the brand stands for- Its economic model, e.g. highly customised premium priced products/services or standardised low cost offerings, or a mixture of both sold direct to customers or via franchising, licensing or reseller networks- Its speed of expansion using its existing routes to market and also new, additional routes to market e.g. e-commerceBy understanding the strategic intent of the client the Best in Class IT Consultant will put forward different IT related options for the client to consider and evaluate.The Best in Class IT Consultant will construct, with the client, an evaluation process to compare the different options and select the best one. S/he will work in partnership alongside the client to co-create the best option powerfully aligned with the organisation’s overall strategy.This strategic thinking discipline and rigour enables him/her to effect transformational change in the client’s business and not just transactional changes. It’s a key area of skill.4. Experience and Know HowThe most successful IT Consultants know everything there is to know about their chosen area of expertise stemming from their background and experience. They also know a lot about a wide variety of the current best practices specifically relating to IT including:- Existing Technologies- Emerging Technologies- Operating Systems Upgrades/Platform Changes- Product Updates/Enhancements- Systems Development/DeploymentBut in addition they are very familiar with the use of broader concepts relating to:- Quality Improvement- Business Process Improvement/Re-engineering- Continuous Improvement- Lean Manufacturing- Efficiency Improvement/Use of Self Managed TeamsThey use their specific and broader knowledge and experience to ‘educate’ their client on:- The true reality of their current situation- What is a possible, preferred situation- The gap the client needs to address- How to address it- How to use the expertise of external specialists/suppliers to provide additional necessary resources to bridge the gapBest in Class IT Consultants are not afraid to challenge their client’s existing thinking, inform the client on what is now possible and advise on how best to go about initiating and delivering required changes.In fulfilling this role they come to be viewed by clients as a trusted friend, someone to be relied upon for best advice, and a long term partner in their business.Not surprisingly there is a strong link between this Experience and Know How capability and their Thought Leadership capability. The two are inextricably woven together. The one, Thought Leadership, is a strong contributor to Experience and Know How, a key differentiator for the best in Class IT Consultant.5. Problem SolvingThe best in Class IT Consultant is not only capable of giving the best advice s/he is also a problem solver. The skill of diagnosing problems leads to the ability to solve problems with all the experience and know how the consultant possesses. So, problem solving is a key area of skill for the best in Class IT Consultant.What do the best in class do differently from the rest? Here are some thoughts:- They see themselves as something of a ‘detective’, objectively, and with an open mind, information gathering from a number of angles. They possess an instinct, an intuition, when hearing something that doesn’t quite ring true.- They use others to share their hypotheses to try and establish the root cause of problems- They look at problems/situations from a variety of angles using proven diagnostic processes and techniques- They gather information which is both objective (existing data) and subjective (thoughts, views and opinions of key stakeholders)- They are ‘emotionally intelligent’ seeing how people’s differing values and/or objectives, internal politics, power plays and hidden agendas may be clouding the root cause of problemsThis ability to not ‘be put off the scent’ when diagnosing and solving client problems is a key contributor to the success of the Best in Class IT Consultant.Not only are they good at combining their objective and subjective information gathering and interpretation skills they are positively interested in growing and developing the combination of skills.They are addicted to rooting out the truth so that whatever the advice they give or the solutions they put forward, they know that what they are proposing has real integrity and will solve the problem.Having said this they are realistic enough to know that often proposals will not be fully accepted by the client for reasons of timing, key stakeholder influences, implementation of other changes and a host of other reasons. They therefore are willing to work collaboratively with the client to deliver what is realistically possible.Best in Class IT Consultants quite simply are excellent problem solvers.6. Relationship ManagementThe Best in Class IT Consultant regards networking and relationship building within a client as essential to their success.They recognise the importance of identifying and getting to know key decision-makers and decision-influencers within the client as well as within their own organisation.They know how to use both direct and indirect networking activities to meet with new people. They understand how to build rapport, start a conversation, continue a dialogue and build a relationship into one in which they are viewed as a valuable friend, confidante and adviser.They understand how to use a variety of influencing styles and skills to best effect.They recognise the needs and agendas of key stakeholders and can sell the benefits of their ideas to them in a way which clearly shows empathy and an understanding of their needs.They understand the decision-making processes their clients use when it comes to specific areas of change. They are in tune with how the internal structure of the organisation actually works versus should work.They recognise the importance of teamwork when it comes to client relationship building and they orchestrate meetings between colleagues in their own organisation with counterparts in the client organisation to build a strong, multi-layer engagement between the two organisations.They know the importance of working with colleagues servicing different parts of the client’s business feeding them information and intelligence on the client’s activities and future plans. This enables them to constantly ‘scan’ and interpret the client’s bigger picture in a holistic way.Best in Class IT Consultants are socially ‘at ease’, able to converse with people on a variety of topics on a variety of levels, in a variety of situations. They are very much ‘people centric’ talking WITH people and not AT people. They are highly responsive to people’s needs fulfilling promises and commitments they have made to build trust in the relationship.In short, far from being ‘technology geeks’ and talking about themselves, they are genuine believers in client intimacy i.e. fully understanding the heart beat and emotions of the client not just the exterior facade.This ability to build relationships enables them to stay in touch with the client, learn from the client, spot new business opportunities and turn them into new revenue streams, probably the ultimate test of their success!7. Change LeadershipAll consultants are ‘change agents’. That is the reason they exist. That is the primary focus of their role. And that is why the skills of change leadership are so important to them and their success.Effective change leaders have positive beliefs about change and the value of change. They possess an understanding of change management processes. They know how to use and apply change management skills in the processes.Change leadership and management of course is a whole topic in its own right so I will focus on a few of the essentials for the IT Consultant.For the Best in Class IT Consultant change leadership is essentially about three areas of contribution – Consultation, Collaboration and Communication.Consultation- S/he will help the client to see and confront the brutal facts, bringing fresh information and new insights to help the client see their current reality, and the need for change, clearly- S/he will help the client create a future, preferred situation using a Gap Analysis or similar diagnostic- S/he will explain the financial benefits of a proposed change so that the client can clearly see the Return on Investment- S/he will assist in creating a coalition for change within the client i.e. the key stakeholder group- S/he will assist in explaining the proposed change and selling it to this group to gain their support- S/he will add value to the client’s planning and implementation processes as a result of similar experiences with other clients CollaborationThe Best in Class IT Consultant will:- Act as a team member, with the client’s own team of people, to identify problems and their root causes- Identify and evaluate strategic options- Co-create customised solutions to the client’s needs, adding know how based on their experience and knowledge gained over the years- Partner the client in selling solutions internally with the client- Bring into play specialists from within his/her own organisation to provide additional resources to the client’s own resources CommunicationThe Best in Class IT Consultant will:- Help the client to construct a stakeholder map- Assist in the delivery of key stakeholder communication plans- Actively support the client with internal stakeholder communication and influencing before and during roll out of changes- Help the client with internal conflict resolution- Act as a coach/facilitator in the change management processIn summary, in the area of change leadership, the Best in Class IT Consultant will partner the client throughout the change management process to ensure that the change is implemented effectively and anchored into the organisation as the new norm.In SummarySo there you have it – the seven practices of Best in Class IT Consultants.Use the checklist below to consider your current level of expertise in these seven practices and use the results to focus on your own personal growth and development needs in these areas.Good luck!