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[SINGAPORE] The Ministry of National Development (MND) made it clear on Monday that under the Housing & Development Board's (HDB) lease buyback scheme (LBS), those who outlive the remaining lease of their flat will not be left homeless.
The ministry is also studying the option of insurance for the elderly to insure against the likelihood of their outliving the lease.
Minister for National Development Khaw Boon Wan noted, however, that such an insurance scheme "cuts both ways".
The benefits of such insurance are restricted only to a minority who outlive the lease, while there is downside for the majority, who will have to forfeit having any unconsumed lease refunded to their estate beneficiaries.
"Our commitment is nobody will be left homeless," Mr Khaw said. "The HDB will look into the circumstances of each case to work out an appropriate housing arrangement, taking into account the elderly's health condition, financial status and the availability of family support."
Mr Khaw was fielding questions from Members of Parliament (MPs) who raised concerns about the elderly outliving their retained leases under the LBS, which allows the elderly to monetise their flat by selling the tail-end of the lease to the HDB.
MP Baey Yam Keng asked the Minister if the HDB could specify the value of lease extensions when an elderly signs up for the LBS. Mr Khaw explained that the government "cannot commit to something so uncertain" due to the market vagaries of property prices.
Those who are concerned about outliving their lease can take up the option of retaining a maximum lease of 35 years under the enhanced LBS from April next year, he said.
Under the enhanced LBS that kicks in next April, joint flat owners only need to top-up to half the age-adjusted Minimum Sum, which allows them to receive more proceeds in cash than before, but still subjected to a cap of S$100,000. The scheme is also extended to four-room flats and households with income of up to S$10,000.
Mr Khaw pointed out that as for LBS flat owners whose flats are selected for the Selective En bloc Redevelopment Scheme (SERS), they will receive compensation for the residual lease of their flat and also SERS rehousing benefits. Compensation for the residual lease will be based on either the market value or the stated refund value, whichever is higher.
Other MPs also asked how the HDB determines the value of the lease under the LBS.
Mr Khaw explained that the flat is valued by a professional private valuer appointed by the HDB, based on widely accepted industry standards and valuation practice. But how the value is split between the front-end retained lease and the tail-end sold lease is "not a straight line depreciation" due to the time value of money and that property with a shorter outstanding lease depreciates faster than one with a longer lease.
Going strictly by industry valuation standards, valuers are likely to value the tail-end of the lease much lower than the lease retained by the owner, Mr Khaw said. This is why the HDB disallows subletting of the entire flat or resale under the LBS, he added. "When valuers value the front-end of the lease to be retained, they take that into account and discount it, so instead of the 75-25 split, it then ends up roughly 60-40."
The significant improvement of value of the tail-end lease sold to the HDB results in higher cash proceeds for the owners - making the LBS "a lot more attractive and meaningful to the owners", Mr Khaw said.
He noted that the property cycle can affect all monetisation options, whether it is lease buyback, right-sizing or disposing the flat.
The key is to make sure that there is proper counselling so that the flat owners are fully aware of the options and do not rush into making a decision, he said.