Planning for retirement with HDB’s lease buy-back scheme?

Looking to downsize and capitalize on the very asset you’re sitting on, or rather living in?

The authorities have made it possible, and soon perhaps even more so, with the Housing Board’s (HDB) Lease Buyback Scheme (LBS).

484A Choa Chu Kang Ave 5. Picture: iProperty

HDB Lease Buyback scheme may be extended to include larger flats

By 2019, the details of HDB’s lease buyback scheme will be set and furnished to help elderly Singaporeans aged above 65 years old.

According to the HDB website and also as announced by the Minister for National Development Mr Lawrence Wong last week, HDB flat owners can sell part of the remaining lease of their HDB flat back to the government and retain the length of the lease based on the age of the youngest owner.

Ang Mo Kio Ave 3, HDB. Picture: iProperty

The seller will then be able to use the proceeds from the sale of part of their flat’s remaining lease to top up their CPF Retirement Account and use it to join CPF Life, a plan which will provide a monthly stipend for life.

This is often a much more viable option for older HDB flat owners, especially those who may have lived in the same units for most of their lives.

Some elderly flat owners may be unwilling to move away from their old neighborhood, are not capable to facilitate a move into a new estate or unit or have a dire need for daily sustenance for a prolonged period of time.

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Restrictions to the scheme will apply but not unrealistic

There is a monthly household income cap of $12,000, at least one of the flat owners must be a Singaporean citizen and he or she must have reached the eligible age of 65 and not own a second property.

The HDB flat must also have at least 20 remaining years on the lease.

Mr Wong says that the scheme is to help the elderly plan for their retirement. There are however a few other options made available to the elderly, such as “right-sizing” to another flat or renting a room out though this may affect the quality of life or at least require some lifestyle adjustments.

With the Lease Buyback Scheme, elderly flat owners will still be able to live in their flats while receiving a monthly income for their daily expenses.

Should a seller wish to terminate their lease ahead of time, he or she can return the flat to HDB and receive a straight-line pro-rated refund for the remaining lease.

Teck Whye Crescent. Picture: iProperty

The monthly income which the CPF LIFE plan provides will not cease upon termination of the lease.

In the case of flat owners outliving the lease period of their flats, HDB will work with them to arrange for appropriate housing. And should the owner of the unit pass away, the child of spouse will have the option of living in the flat for the balance of the lease period or return the flat to HDB.

See more: Government will not buy back HDB flats unsold under EIP