Annual take-up of HDB’s Lease Buyback Scheme more than doubles

Five hundred and forty-one households have taken up Housing and Development Board’s Lease Buyback Scheme within a year of enhancements, with 233 households owners of four-room flats.

HDB noted that this annual take-up had more than doubled compared to previous years. Since the launch of the scheme in 2009, 471 households signed up in the first four years – averaging at about 117 annually. A further 494 took up the scheme following modifications in February 2013 over a period of about two years, an average of slightly less than 250 a year.

The Lease Buyback Scheme is catered to elderly home owners living in four-room flats or smaller. They can sell the tail end of their flat’s 99-year lease back to HDB, in exchange for a cash bonus.

On top of that, the proceeds from selling their flat’s lease will be used to top up their CPF Retirement Account. This provides them with monthly payouts, while they continue living in their flats.

Among the 541 households who took up the scheme is Mr Abdul Rahman Kemat. He and his wife have been living in their four-room flat in Jurong West for since 1985.

In January, the 68-year-old decided to sell about 34 years of the remaining lease of his flat to the Government under the Lease Buyback Scheme, giving him a payout of about S$1,000 each month. HDB then sold a new 35-year lease of Mr Abdul Rahman’s flat to him at S$228,900 under the Lease Buyback Scheme.

Because the security officer expects to retire soon, he said the extra income is useful. And that the Lease Buyback Scheme was the best option for him, as he did not want to downgrade to a smaller flat or rent out his apartment.

“Because I love this place so much,” he said. “The people here, I know well. My children are all grown up, they’ve got grown-up children. So I think it is not suitable for me to stay with my children. So I prefer to stay independently here with my wife.”

The latest round of enhancements, which kicked in in April last year, saw four changes to the scheme to benefit more elderly citizens and make it more flexible:

  • The scheme was extended to 4-room flats, covering 75 per cent of elderly households, up from 35 per cent previously
  • The income ceiling was raised from S$3,000 to S$12,000
  • Households with two or more owners will only need to each top up their CPF Retirement Account to the basic age-adjusted retirement sum, instead of the full age-adjusted retirement sum. This gives them more cash in hand
  • Elderly households can choose how long they want their lease to be retained, from 15, 20, 25, 30 or a maximum of 35 years. But it must cover the youngest owner until he or she is 95 years old. Previously, flat-owners only had the option of keeping a 30-year lease

‘STILL A SMALL PORTION OF ELIGIBLE HOUSEHOLDS’: ANALYST

Since then, around 5 per cent of the 541 households who signed up had income exceeding S$3,000. Nearly half, 261 households, chose to retain a lease length other than 30 years.

“Perhaps one of the reasons is that retirees in four-room flats may feel that the value of their flats is a bit larger,” said Mr Nicholas Mak, executive director of SLP International Property Consultants. “So if they were to join this scheme, they would be able to unlock a larger part of cash that can help them in their retirement planning.”

Mr Mak said while there was a significant increase in the take-up of the Lease Buyback Scheme, it is still a small proportion of the eligible households.

“When we look at over 500 households that have taken up this scheme, and we compare this islandwide, with all the HDB flats that’s available out there, the number seems to be very small. I estimate less than 1 per cent of the eligible households have actually taken up this scheme,” he said.

Mr Mak said that perhaps more awareness of the scheme was needed to encourage more households to take part. HDB added that it will continue outreach efforts to help elderly households better understand the monetisation options available to them.

HDB is providing financial counselling for applicants of the Lease Buyback Scheme. During these counselling sessions, the various monetisation options available are explained to those interested. They are also given an estimation of how much total payout and monthly income they can expect to receive.

Source : Channel NewsAsia – 15 May 2016