It will buy back tail-end of flat lease at market rate, with money going to CPF Life
FOR 68-year-old retiree Teng Kiat Hwa, who owns a three-room HDB flat in Toa Payoh, his home is his only asset.
Since he fell ill and stopped driving a taxi, he has had no income and his CPF money has been dried up by medical bills.
TO SELL OR NOT TO SELL?: Mr Teng, 68, a retiree who owns a three-room HDB flat in Toa Payoh, will be able to sell part of his flat's remaining lease to the HDB next year, but he is undecided about taking up the option. -- ST PHOTO: LIM SIN THAIBut come next year, Mr Teng will be able to sell part of his flat's remaining lease to HDB, and receive a cash payment of $5,000 and an annuity payout of about $500 monthly from CPF Life.
Details of the long-awaited 'Lease Buyback Scheme', which helps the elderly sell their HDB flats to the Government for cash - while still being able to stay in them - were unveiled yesterday by National Development Minister Mah Bow Tan.
This is how it works: HDB will buy back the tail-end of a flat lease at market valuation, leaving a 30-year lease for the household. So, for example, if a flat has a remaining lease of 70 years, HDB buys 40 years of the lease from the flat owner. It pays market rate for the lease it buys and this money goes to the new CPF Life annuity in the flat owner's name.
According to Mr Mah, the cash is enough to give a typical flat owner about $500 monthly for life. At the end of 30 years, the flat's ownership is then transferred to HDB.
If the flat owner dies before the 30 years is up, his family gets a pro-rated refund from the HDB. If he outlives the 30-year lease, HDB may extend the lease or relocate the flat owner to rental housing.
To encourage people to opt for the scheme, HDB is also providing a $10,000 'bonus' for anyone eligible for the scheme who signs up. Half of this - $5,000 - will be paid immediately in cash. The other $5,000 goes into the CPF Life annuity.
One catch: the scheme will be available only to 25,000 low-income households in Singapore. That's because the eligibility criteria restricts the scheme to those aged 62 and above and who own two- or three-room HDB flats.
Among other things, they must also have fully paid up for their flats, or else have a loan amount outstanding of less than $5,000.
Mr Mah said in Parliament yesterday that this is consistent with the objectives of the scheme, which was first announced by Prime Minister Lee Hsien Loong at last year's National Day Rally.
He said the scheme is meant to supplement the recently announced CPF Life annuity by providing a stream of retirement income for poor households who may not have the minimum sum needed to sign up for CPF Life, but still need steady income in old age.
He added that the 25,000 households that qualify for the scheme represent about 70 per cent of elderly households in two- and three-room flats.
Asked for his reaction, Mr Teng said in Mandarin that it was 'an interesting option'.
'But we must consider it thoroughly before taking it up. My wife and I wanted to leave this flat to our kids,' he added.
Meanwhile, industry players yesterday welcomed the scheme, but expressed concern that the criteria were too strict.
This was also brought up in Parliament by Madam Ho Geok Choo (West Coast GRC), who asked if owners of larger HDB flat can qualify for the scheme.
Mr Mah replied that this can be examined after the scheme was implemented and feedback given.
Mr Eugene Lim, the assistant vice-president of ERA Realty Network said renting out the flat may give better yield or payouts than the annuity.
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