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Lease Buyback Scheme: Advising the elderly on unlocking the value of their flats

Even though the Government will step up outreach efforts to help more people understand the Lease Buyback scheme, Minister of State for National Development Maliki Osman said the Government will not proactively try to "sell" it, to avoid misperceptions.

SINGAPORE: Rent out rooms, move to a smaller flat, or sell part of the flat's lease - these are choices elderly households have if they wish to get cash out of their flat. But which is the best option?

Observers say following changes to the Lease Buyback Scheme announced on Wednesday (Sep 3), it is crucial for seniors to seek advice on these options from financial counsellors at branch offices of the Housing and Development Board. 

Mr Mohamed Ismail, Chief Executive Officer at PropNex Realty helped paint different scenarios, starting with that for a senior citizen if he went for the outright option of selling his flat. "A four-roomer, if he qualifies, sells it for S$400,000, and if he buys a studio apartment, say for about S$120,000 or S$130,000 depending on the location, he is able to free up a greater amount of cash, but one must understand he is not going to get that annuity on a monthly basis, as compared to someone who opts to do a rental of his flat.

“One of the greatest disadvantages of renting a flat in Singapore is this – with effect from the day you start to rent a room or the house, you are going to lose privacy. And for those who want to have the privacy and the space, chances are the Lease Buyback Scheme would be a better option to cater to their needs," he said.

Seniors would need more help in understanding how the various monetisation options work for them, observers added. Mr Christopher Tan, CEO of financial advisory firm Providend, said: “First of all, we must make it easy for people to understand. For example, the Central Provident Fund Board has been doing a lot of education, in all languages, yet the elderly still cannot understand the system. So you must find a way to do it in a very simple way, hopefully in their Mother Tongue."

The Government had said it would step up outreach efforts to help the elderly understand the changes to the Lease Buyback Scheme. The changes will come into effect in April next year.

However, Minister of State for National Development Maliki Osman said the Government will not try to "sell" the scheme. “It is a very sensitive matter because many elderly may misperceive or misread the effort of going out and encouraging them to take part, it is as though we are buying back the flat or taking back the flat.

“Even when we started the scheme, many of the misconceptions out there were like: 'Oh, the Government is taking back my asset and therefore, I do not want it'. So I think we will not proactively try to sell the Lease Buyback Scheme to every elderly person out there. What is more important is we will sell the message that it is an option they can exercise," Dr Maliki said.

Those who want to know more about the scheme can call the HDB Branch Service Line at 1800-225-5432.