This is why it burns a big hole in HDB’s budget and causes a deficit.
When we talk about the size or value of the past reserves, obviously we are talking about their current value.
That’s the most accurate representation of the size of our past reserves.
Suppose you bought a property in 1965 and paid $10k for it. Today, you want to use your property as collateral for a loan, you will be horrified if the bank tells you the value of your property is what you paid in 1965.
So you see, the appreciation of your property represents real money.
It’s not accounting sleight of hand when land that was bought for $1x in the past now has a value of $10x. It’s really very simple and straightforward.
Accounting sleight of hand looks like this!
Now, let me show you what accounting sleight of hand loos like.
Here’s a hypothetical example.
The fair market value of a parcel of land is $10x million.
At this price, it causes HDB a deficit.
Someone says: let’s just put the price of land at $1x instead of $10x.
Tada! The deficit is gone!
That, my friend, is accounting sleight of hand.
The suggestion that a government can arbitrarily set a value for land is dangerous!
It makes for non-transparency and therefore little accountability.
Why non-transparent? Because there is no benchmark. It is priced arbitrarily. It can be any price.
And non-transparency leads to little or no accountability and paves the way for corruption when less-than-honest people are in charge.
Rules are there to protect!
Rules are there to protect past reserves.
The government-of-the-day does not own the land. They are custodian of the state’s wealth.