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HDB to relax rules on CPF use for purchase of older flats; will take effect in May
SINGAPORE's National Development Minister Lawrence Wong said in Parliament on Thursday morning that his ministry is working out details on relaxing Central Provident Fund (CPF) loan rules on the purchase of older Housing Board resale flats, and will announce them soon for implementation in May this year.
One issue is CPF rules, specifically the restriction in CPF usage for flats with less than 60 years of lease remaining, Mr Wong said.
Some banks also take reference from these restrictions when assessing how much loan to extend. As a result, both CPF and loan quantums are reduced for the purchase of such older flats, he said.
"The CPF rule is intended to safeguard the retirement adequacy of buyers who purchase older flats, but its design has led to some unintended consequences. For example, a buyer of a 39-year-old flat can use full CPF; but just a year later, and the amount of CPF will be restricted.
"And there's no good reason why this should be so just because the flat became a year older," Mr Wong pointed out.
He said the Ministry of National Development and Ministry of Manpower have been studying the issue.
"In fact, the focus should not be on the remaining lease of the flat. What we want to ensure is that buyers purchase flats with leases that are long enough to last them for life.
"And if that is done, then we can relax CPF usage rules, even if the remaining lease is less than 60 years," he said.
Mr Wong had said in August last year that his ministry is looking into how to let buyers of shorter-lease flats dip deeper into CPF funds for their purchase, without compromising their retirement savings.
The move aims to address growing concerns among flat owners over their older flats' depreciating leases and the difficulty in selling these - partly because of the limitations placed on prospective buyers over the use of their CPF funds.
If there is more flexibility in the use of CPF funds to buy shorter-lease flats, it would help those who want to purchase flats in more mature HDB estates.
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