Lease buybacks: an issue of mindset

The lease buyback scheme for senior citizens will finally be put to action after being planned for almost two years.

The scheme is among the most innovative programmes of the Housing Board in recent years. The scheme’s detail, recently revealed in Parliament, affirm the perception of observers regarding the role of HDB in Singapore, which is to be part of the expanding social support system.

The process works with HDB leaving 30 years lease of a home owner and buyback the lease’s tail-end at market value.

A grant of $10,000 will top up the sum, $5,000 of which is given as cash upfront to the home owner and the rest is for purchasing an annuity, making $500 per month for life of typical payouts.

For eligibility, a homeowner must be 62 years old and above, has a three-room flat or smaller, have enjoyed one housing subsidy, and have already paid off most of his home loan.

If the home owner dies before 30 years is finished, a refund from the remaining lease will be given to his family, to be added to his annuity’s unused portion.

The goal of the scheme is quite simple, but implementing it will unlikely be straightforward.

For it to be implemented, some concerns have to be raised by HDB. First and foremost is that it will need to let the senior citizens understand the rewards of the scheme.

Conducted interviews of eligible elders last week showed disinterest towards the idea of giving up their property.

Analysts interviewed by The Straits Times expect a psychological barrier repelling the scheme, which is the mindset of Asian culture of having their own home.

Mohamed Ismail, PropNex’s Property agency chief, said he expects a lukewarm reception for the initial implementation since “it's an Asian thing to own a property”.

ERA Asia-Pacific’s property agency director Mr. Eugene Lim added that elders like to keep their properties. “It's like a security blanket, something they can sell off for emergencies - and a status thing,” he said.

Therefore, to be fully accepted, the scheme has a lot of work to be done to stimulate the awareness of elders.

Since HDB is aiming for elders with low income, they are dealing with less educated group, and special attention is needed for them to understand the scheme’s intricacies – a concern raised during its discussion in Parliament.

Particularly, HDB should also aim for the children.

Another obstacle is the fact that many are unable to give up their flats for the sake of their children. However, not all children want or need to inherit the property of their parents.

Guiding the parents to gain financial stability also helps in relieving the financial burden of their children.

One mentioned suggestion in Parliament is to have the initiative extended to a larger group of elders, such as those with four-room or bigger flats – since they are more probably “asset-rich and cash-poor”.

More and more MPs have also requested to expand the scheme of HDB to those who already had two or more housing subsidy. Mah Bow Tan, National Development Minister, said that HDB is open for these ideas.

However, expansion of the scheme at an early time might help improve the take-up rate and its popularity on senior citizens.

Finally, the scheme’s variation should be considered by the HDB. Some analysts suggested allowing elders to opt for shorter lease buybacks.