Land is scarce in Singapore, and it is our main natural resource. It is thus protected as part of the reserves.

When the Government sells land, it does not create new wealth – it merely converts the physical asset into a financial asset. When land is converted into a financial asset, the financial asset remains part of Past Reserves and cannot be used for expenditure.

• As the State holds ultimate title to the land, land which returns to the State at the end of a lease becomes State land once again and is protected as part of the Past Reserves.

• When that happens, there is no “profit” or net increase in the reserves. This is because the value of the “reversionary interest” in land (i.e. the right to resume ownership of the land at the end of a lease) is already protected as Past Reserves.

• In other words, when land is sold, the financial proceeds that the State receives make up for the State's loss of use of the land for the lease period, and not for the State giving the land away forever.

Spending the proceeds from selling land is simply akin to using up more of the reserves. Instead, the Government invests the land sales proceeds with the rest of the reserves, and spends up to 50% of the returns through the NIR framework.

This provides a more stable and sustainable stream of income over time than directly spending the land sales proceeds.

• First, land prices move in cycles and can be volatile. This would cause Government revenues to fluctuate with the market, creating too much uncertainty for the Government to plan for the long term.

• Second, if the Government relies on land sales to fund spending, it could develop a vested interest in keeping land prices high to maximise revenues.

Find out more about what our reserves are used for.