The Housing and Development Board (HDB) Lease Buyback Scheme (LBS) is a unique initiative by the Singaporean government aimed at helping senior citizens monetize their homes to supplement their retirement income. Introduced in 2009, this scheme provides a way for elderly Singaporeans to enjoy financial security in their golden years while continuing to live in their homes. Let's delve into the key aspects of this program, its benefits, eligibility criteria, and how it works.

 

1. What is the HDB Lease Buyback Scheme?

The HDB Lease Buyback Scheme allows elderly homeowners living in HDB flats to sell part of their flat’s remaining lease back to the government, while retaining a 15- to 35-year lease to continue living in the same flat. The proceeds from this sale are used to top up their Central Provident Fund (CPF) Retirement Accounts, and in turn, these funds are used to purchase CPF LIFE annuities, which provide a steady stream of income for the rest of their lives.

The scheme is particularly designed for elderly homeowners who wish to age in place, ensuring that they don’t have to move out of their familiar environment but still benefit from additional retirement funds.

Most of the elderly folks are reluctant to move out of the neighbourhood where their decades-long friends reside, said JT Chia, Managing Director of Propertyforsale.

 

2. Eligibility Criteria

Not every HDB flat owner qualifies for the Lease Buyback Scheme. The eligibility requirements are as follows:

• Age: At least one owner of the flat must be aged 65 or older.

• Flat Type: Initially, the scheme was available only for owners of 3-room or smaller flats. However, as of 2015, the scheme was expanded to include owners of 4- and 5-room flats, as well as larger flats like executive apartments.

• Flat Ownership: The flat must be owned under the Home Ownership Scheme (excluding those with more than one property).

• Remaining Lease: The flat must have a remaining lease of at least 20 years after selling the part to the government.

• Income Ceiling: The combined household gross income must not exceed $14,000 per month.

• Minimum Lease Period: Homeowners must retain a lease of at least 15 years (this can go up to 35 years depending on their age).

 

3. How Does the Scheme Work?

The process of the HDB Lease Buyback Scheme is straightforward, designed to be hassle-free for senior citizens. Here’s a step-by-step breakdown:

• Step 1: Application – Interested flat owners submit their applications to HDB for review.  

• Step 2: Lease Retention – Homeowners can choose to retain a 15- to 35-year lease, based on their age and their retirement plans. For instance, those aged 65-69 need to retain a 30-year lease, while those aged 80 and above only need to retain a 15-year lease.

• Step 3: Lease Sale – The remaining lease is sold back to the government. The amount received from this sale is then used to top up the CPF Retirement Account (RA). 

• Step 4: CPF LIFE Annuity – The proceeds from the lease buyback are credited to the homeowner’s CPF RA. After the top-up, homeowners must use the funds to purchase a CPF LIFE annuity, which ensures a lifelong monthly payout for their retirement. Any remaining cash (after CPF LIFE top-up) is given to the homeowner as a lump sum.

 

4. Benefits of the HDB Lease Buyback Scheme

The Lease Buyback Scheme provides several key benefits to elderly homeowners:

1. Unlocking Home Equity Without Relocation
One of the major advantages of the LBS is that it allows homeowners to monetize their flat without selling and relocating. This is ideal for seniors who are emotionally attached to their homes and wish to continue living in familiar surroundings.

2. Steady Retirement Income
The proceeds from the sale of the lease are used to top up the CPF RA, which is converted into a CPF LIFE annuity. This guarantees a steady monthly income for the rest of the homeowner’s life, ensuring financial security in retirement.

3. Flexibility of Lease Retention
Seniors have the flexibility to choose the number of years they want to retain their lease based on their age and circumstances. This allows them to continue living in their flat for many years without worrying about running out of housing options.

4. Lump Sum Cash Payout
After fulfilling the CPF top-up requirement, any remaining proceeds from the lease sale can be taken as a lump sum cash payout. This provides homeowners with immediate access to cash for medical expenses, daily living costs, or other financial needs.

5. Enhanced Retirement Savings
Through the CPF top-up and CPF LIFE annuity, seniors enhance their retirement savings, reducing their dependence on other financial sources.

 

5. Considerations and Potential Drawbacks

While the Lease Buyback Scheme offers a great deal of flexibility and financial support for retirees, it is not without its considerations:

1. Reduction in Inheritance
By selling a part of the lease, the flat’s future value is reduced. This may impact the inheritance potential for beneficiaries, as the remaining lease on the flat will be shorter when passed on to their children.

2. Uncertainty Regarding Lifespan
Seniors may find it difficult to accurately predict how long they will live. Retaining too short of a lease could lead to complications if they outlive the lease period, potentially leaving them in need of rehousing.

 

 6. Conclusion

The HDB Lease Buyback Scheme is a thoughtful initiative that caters to the financial needs of aging Singaporeans. It provides a balanced solution by allowing elderly homeowners to unlock their housing wealth while ensuring they can continue to live in their homes for the rest of their lives. With its expanded eligibility criteria, the scheme is now more inclusive, benefiting a larger portion of the elderly population.

As with any retirement planning tool, it’s important for homeowners to weigh the pros and cons of the Lease Buyback Scheme carefully. For those looking to increase their retirement savings without leaving their home, this scheme offers a viable and beneficial option.