CASH CONVERTERS

Besides the Lease Buyback Scheme, retirees hoping to unlock their HDB flat’s value can also check out three other options.

While we look forward to idyllic days when we finally retire, the truth is that many of us may find our savings insufficient and retirement too expensive. It doesn’t help that Singapore’s population is facing a double whammy: an ageing population and a declining birth rate. While we had 5.2 working-age citizens per elderly citizen in 2014, this will drastically dip to just 2.1 in 2030.
What this means is, unlike our parents’ generation who can count on their kids to support them, those of us retiring in the next decade or two will likely have to fund our own retirement.To help senior citizens – current and future ones – plan their retirement better, the Housing Board (HDB) has four ways for them to monetise their HDB flat. One is the enhanced Lease Buyback Scheme, featured in the first part of our Retirement Special series last month. Here are three other methods your elderly parents – or you, in the not-toodistant future – will find useful.

The most common and arguably easiest option, renting out a spare room or an entire flat allows retirees to earn rental income without having to sell their home.
According to a 2013 survey conducted by the Ministry of National Development (MND), one in 10 senior citizens aged 55 years and above sublet their flat or a spare bedroom, and for a myriad of reasons. The majority do so for additional retirement income while, interestingly, a minority choose to sublet a room as they want company.
All homeowners (Singaporeans and Permanent Residents alike) can sublet their HDB-flat bedrooms – store rooms, bomb shelters and living rooms don’t count – anytime they wish, to tenants of any nationality and for as long as they wish, without seeking the HDB’s approval. They do, however, need to log their tenants’ details with the HDB online (www.bit.ly/1HKTMIm) within seven days of the commencement of the subletting.
Do note that only owners of three-room HDB flats and bigger can lease out their spare rooms. Three-room flat owners can rent out one bedroom, subject to a maximum number of six occupants in the entire unit. Owners of four-room or bigger units can rent out a maximum of two bedrooms (regardless of the number of bedrooms you have), housing a maximum of nine people.
If you choose to sublet a whole HDB unit – only Singaporeans are allowed to do so – make sure you fulfil the minimum occupation period of five years (or three years, if you bought an unsubsidised HDB flat from the open market before Aug 30, 2010). You will need to seek prior approval from the HDB (www.bit.ly/1xhYihg) and each approved subletting period is a maximum of three years for Malaysian tenants, or 1½ years for non-Malaysian tenants.
One-room and two-room units can accommodate a maximum of four persons; three-room flats, six persons; four-room or bigger flats, nine persons.One more thing to note: a recent regulation that came into effect from May 1, 2015, disallows homeowners from subletting their HDB rooms or flats to workers in the marine and process sectors, including the chemicals and pharmaceutical sectors.

First launched in 1988, studio apartments were built and sold by the HDB to offer senior citizens aged 55 years or older, the option to sell and cash in on their current, bigger homes. They are only open to Singaporeans and PRs whose average gross monthly household income does not exceed $10,000. Married buyers must include their spouse in the application, though unmarried, divorced or widowed buyers can still apply for a studio apartment. Retirees can also choose to apply for a studio apartment with a non-family member, provided he or she is at least 35 years old.
These apartments, available in sizes of 36sqm (387sqf) and 45sqm (484sqf), come fully renovated with floor tiles for the whole flat, wall tiles in the toilet and kitchen, window grilles, a built-in wardrobe and a complete kitchen with cooker hood and stove. They also boast elder-friendly features such as grab bars and pull cords linked to an Alert Alarm System.
On paper, a smaller, cheaper home for the elderly in a specially built environment sounds like a good idea. However, some buyers complain about the high prices, compared to that of a similar-size twobedroom Build-To-Order (BTO) apartment. Besides the much shorter 30-year lease versus a two-room flat’s 99-year lease, buyers of studio apartments are also not eligible for HDB grants.
According to the BTO Sales Launch in May this year, the price of a studio apartment in Tampines starts from $86,000. In comparison, a two-room flat in Sembawang costs $75,000; moreover, if the buyer receives the maximum amount of grants, the flat can be as cheap as $15,000.
In 2013, a peeved Patrick Soh, then 60, wrote to The Straits Times’ Forum page. His 47sqm studio apartment in a mature estate had cost him $168,000, while two-room BTO flats with longer leases were priced more attractively.
MND later clarified that both are very different products catering to different segments of the market and thus should not be compared. Still, this led to some property experts, such as Nicholas Mak, executive director of research and consultancy at SLP International Property Consultants, suggesting that the government should consider scrapping the studio apartment scheme or extending the lease beyond 30 years.
Unlike two-room flats, studio apartments cannot be sublet for rental income or resold on the open market; it must be returned to the HDB if the owner chooses not to live in it any longer. Buyers must also pay for the studio apartment in full (with CPF and cash) and cannot take a loan, a point that one senior citizen overlooked when he applied for his studio apartment in 2011. Last November, local news website The Online Citizen reported that the senior citizen lost over $10,000 in deposit and fees on his studio apartment when he could not cough up the remaining $93,000 cash to pay for his new $170,000 home.
If you are considering buying a studio apartment, note that like any HDB flat application, you must sell off your share in your existing HDB home within six months of taking possession of your new place. Otherwise, you’ll have to surrender the unit to the HDB and face a forfeit sum of 5 per cent of the purchase price, and/ or any other amount set by the HDB.If you don’t sell off your share in a private property before taking possession of your studio apartment (there’s no six-month grace period for private property owners), your application will be cancelled and you will forfeit your option fee and/or any other amount set by the HDB.

Similar to the studio apartment scheme, this also encourages elderly homeowners to downsize, but dangles an attractive Silver Housing Bonus (SHB) carrot. As long as you use some of your net sale proceeds to top up your CPF retirement account (RA) and join CPF Lifelong Income For The Elderly (CPF LIFE) to ensure a regular stream of retirement income, you can apply for the SHB. You’ll receive $1 for every $3 top-up, or up to $20,000 per household. Those who didn’t get any net proceeds and thus, did not top up their CPF RA, won’t receive any SHB.
Like the Lease Buyback Scheme, the Right-sizing Scheme requires you to top up your RA before you can receive the rest in cash. In this case, you need to top up a minimum of $60,000 (or all your net sale proceeds if you received less than that) to any of the owners’ CPF RA, before you can receive the rest in cash.
If your net sale proceeds are between $60,000 and $160,000, you can keep up to $100,000 in cash. Received more than $160,000? You’ll first need to further top up the CPF RA of the flat owner with the lowest RA balance up to the prevailing full retirement sum (depending on your age, at a maximum of $161,000 for those aged between 64 and 69 years). Only then, can you keep the excess cash on top of the $100,000.
This scheme offers more flexibility in terms of the flat size. Seniors can choose to buy a smaller (three-room flat or smaller) and cheaper flat from the resale market or directly from HDB, or a studio apartment. Those who prefer a four-room flat have cried foul, but HDB explains that this move is to encourage elderly households to move to a smaller home so as to maximise the sales proceeds from their previous property and build up their retirement fund.
To qualify, at least one owner must be a Singaporean aged 55 or above, with a maximum household income of $10,000. Your existing HDB flat must meet the minimum occupation period for resale.
If you’re downsizing from a private property, its annual value must be $13,000 or less (this scheme aims to help lower-income elderly households, hence those in more high-value private properties are excluded). Of course, if you concurrently own a second property, you’re not eligible, either.
Also, your smaller HDB flat cannot cost more than the selling price of your existing property. That means you can’t “downgrade” from a cheaper four-room flat in far-flung areas such as Jurong West and move into a pricier three-room flat in a more central location in, say, Redhill.
These four schemes currently offered by the HDB each come with their pros and cons. It is never easy to adapt to change, be it accepting a stranger into your home when you rent out a room, or choosing to downsize to a smaller flat – though seniors can choose to age in place and join the Lease Buyback Scheme.To pick a scheme that best suits your needs, find out more about these monetisation methods on the HDB’s website (www.bit.ly/1xki1Zf) and make an appointment to speak to your HDB officer for more details.