What is an HDB Lease Buyback Scheme?

Singapore's Housing and Development Board (HDB) has long been a backbone of the nation's housing landscape. With over 80% of Singaporeans residing in HDB flats, these homes are not just places to live; they represent significant financial assets for many families.

As Singapore's population ages, the government has introduced various initiatives to support senior citizens in their retirement years. One such initiative is the HDB Lease Buyback Scheme (LBS), designed specifically to help elderly homeowners convert their property into a source of retirement income while allowing them to remain in their homes.

The HDB Lease Buyback Scheme offers a practical solution for asset-rich but cash-poor homeowners. It allows seniors to unlock the value of their HDB flats without having to sell or move out, providing them with much-needed liquidity during their retirement.

What is the HDB Lease Buyback Scheme?

The HDB Lease Buyback Scheme is a government initiative that enables elderly homeowners to sell part of their flat’s remaining lease back to HDB. This scheme primarily targets Singaporeans aged 65 and above who own HDB flats. The main purpose of the LBS is to convert a portion of the flat's lease into cash while allowing homeowners to retain a smaller lease for continued living.

By participating in the scheme, seniors can access funds that can be used for various needs, such as healthcare expenses or enhancing their retirement lifestyle, without sacrificing their home environment.

How Does the Scheme Work?

The process of the HDB Lease Buyback Scheme is straightforward and designed with seniors in mind. Here’s how it works:

Step 1: Selling a Portion of the Lease Seniors sell part of their flat's remaining lease to HDB while retaining a minimum lease of 15 to 35 years, depending on the age of the youngest owner, ensuring it covers them until at least age 95.

Step 2: Receiving Proceeds Sale proceeds are first used to top up the homeowner's CPF Retirement Account (RA) to the Full Retirement Sum (FRS), and any remaining amount can be taken as a lump sum, subject to a $100,000 cash cap.

Step 3: Monthly Payouts The funds in the CPF RA are used to purchase CPF LIFE, which provides lifelong monthly payouts to supplement retirement income.

Example Calculation

Consider a couple aged 65 (joint-owners) who own a fully paid 4-room flat with a remaining lease of 65 years. They decide to sell back 35 years of their lease:

• Sale proceeds: Approximately SGD 190,000
• LBS Cash Bonus received (for a 4-room flat): Up to SGD 15,000
• Total proceeds are then used to top up the CPF Retirement Account: SGD 205,000

Note: If the CPF Retirement Accounts of both owners are below the required Full Retirement Sum (FRS), all proceeds (including the bonus) will go toward the CPF RA top-up.

So, this amount (SGD 205,000) will then be used to secure monthly payouts through CPF LIFE.

Eligibility Criteria

To qualify for the HDB Lease Buyback Scheme, applicants must meet several criteria:

• Age: At least one owner must be 65 years old or older.
• Citizenship: At least one owner must be a Singapore Citizen.
• Income Ceiling: The combined household gross income must not exceed SGD 14,000 per month.
• Flat Type: All types of HDB flats are eligible except short-lease flats, Housing and Urban Development Company (HUDC) flats, and Executive Condominiums.
• Minimum Occupation Period: Owners must have lived in the flat for at least five years.
• Remaining Lease: The flat must have at least 20 years remaining on its lease after selling part of it back.

Benefits of the HDB Lease Buyback Scheme

The LBS offers several advantages:

• Financial Security: It provides a steady stream of retirement income through CPF LIFE.
• Home Retention: Homeowners can continue living in their familiar surroundings while monetising part of their assets. This allows seniors aged 65 and older to sell a portion of their HDB flat's lease back to the government while retaining the right to live in the flat for the rest of their lives. The proceeds are used to top up their CPF Retirement Account, providing monthly payouts for retirement.
• Accessibility: Compared to downsizing or selling outright, this scheme allows seniors to access funds without relocating.

Challenges and Considerations

While beneficial, there are some challenges associated with the scheme:

• Lease Duration Implications: Selling part of the lease reduces future inheritance potential for beneficiaries.
• Flexibility Limitations: Seniors may find themselves less flexible if plans in the future change, such as moving abroad or needing more space.

However, one of the common options for monetising housing assets includes renting out rooms to overcome those challenges.

Note: Sale or renting out the whole HDB unit in the open market is prohibited under LBS.

How to Apply for the HDB Lease Buyback Scheme

Applying for the LBS involves several steps:

1. Submit Interest: Interested homeowners should apply to HDB.
2. Financial Counselling Sessions: Applicants will be invited to financial counselling sessions to understand their options better.
3. Documentation Required: Necessary documents include identification, proof of ownership, and details regarding household income.

The expected timeline from application submission to approval can vary but typically takes several weeks.

Is the HDB Lease Buyback Scheme Right for You?

When considering whether the LBS is suitable, reflect on these questions:

• Do you wish to remain in your current home during retirement?
• Are you comfortable with reducing your flat's future resale value?

Note:

1. Reduced Remaining Lease: Selling part of the lease back to the government shortens the remaining lease on the flat, which can lower its market value when inherited .
2. Resale Restrictions: Once the lease is sold, the flat cannot be resold on the open market, limiting heirs' options for liquidating the asset.
3. Market Perception: A shorter lease makes the property less attractive to potential buyers, further diminishing its resale potential.
4. Lower Inheritance Value: The combination of a reduced lease and resale restrictions can lead to a lower overall inheritance value for beneficiaries, as they may not be able to sell the flat for a comparable price to similar properties with longer leases

• Would additional monthly income enhance your retirement lifestyle?

Comparing alternatives like renting out rooms or downsizing can also provide insights into what may work best for your situation. Seeking guidance from financial advisors can help clarify any uncertainties and ensure informed decisions.

Bottom Line

The HDB Lease Buyback Scheme serves as an innovative solution for elderly Singaporeans looking to enhance their financial security without sacrificing their homes. By unlocking part of their housing wealth, seniors can enjoy greater peace of mind during retirement.

If you believe this scheme could benefit you or someone you know, consider reaching out to HDB or consulting with a financial advisor today. Exploring this option could be an essential step towards securing a comfortable and financially stable retirement.