User:MissGoldfish/Lease Buyback Scheme

Lease Buyback Scheme
The Lease Buyback Scheme (LBS) is a new and innovative monetisation option introduced by the Singapore Government to help elderly households in three-room or smaller flats unlock their housing equity to meet their retirement needs.

It was announced by Singapore’s Minister for National Development, Mr Mah Bow Tan, in Parliament on 6 Feb 2009, and the Housing & Development Board (HDB) has started accepting applications for LBS from 1 Mar 2009.

Under this scheme:

- HDB will buy back the tail-end of the lease of the flats, leaving the elderly with a shorter 30-year lease.

- In addition to the value of the housing equity unlocked from the shorter lease, there is a generous subsidy of S$10,000 from the Government.

- Of the total value, S$5,000, will be given upfront as a lump sum. The remainder will be used to purchase an Immediate Annuity from the Central Provident Fund (CPF) Board to provide a monthly stream of income for life.

The payout under the Annuity is in addition to whatever source of income the elderly already have, e.g. CPF savings, investments, insurance, rent from subletting of rooms etc. The shorter 30-year lease term is non-transferable in the open market. If it needs to be terminated prematurely, the lessee or his beneficiaries will receive a pro-rated refund on the residual lease.

Numerical Example of LBS
The amount of monthly income that an elderly household will receive from the LBS will depend on the market value of the flat, the amount of remaining lease, the age and gender of the lessee.

Take the example of a 3-room flat with a remaining lease of 70 years, and a market value of S$236,000. The lessees sell to HDB 40 years of the lease, and continue to stay in the same flat which is left with a 30-year lease.

HDB bought the 40 years of lease at about S$104,000, and provide a top-up of S$10,000 in Government subsidy, i.e. a total of S$114,000. Out of this S$114,000:

a)	The lessees will receive S$5,000 upfront

b)	The remaining S$109,000 will be used to purchase an Immediate Annuity from CPF Board that yields a monthly payout for life.  The indicative monthly payout is:

- S$530 if a male is the sole lessee who joins the LBS at age 62

- S$490 if a female is the sole lessee who joins the LBS at age 62

- a combined figure of S$510 if the flat is jointly owned by an elderly couple both aged 62

Advantages of LBS
LBS enables elderly residents to age in place comfortably. They can continue to stay in their flats, in the same familiar environment and community that they have grown accustomed to. Besides, they will have a steady source of monthly income for the rest of their life. This is particularly helpful to low-income elderly households of smaller flats who are unable to take advantage of other monetisation options, e.g. downgrading to a smaller flat elsewhere, or renting out the flat.

Eligibility Conditions
LBS is available to Singapore citizens owning three-room or smaller HDB flats where the outstanding mortgage loan is S$5,000 or lower. They must also meet the following criteria:

a.	Age of youngest lessee is 62 years or older;

b.	Household income of S$3,000 or less;

c.	Have not previously owned a 4-room or larger flat or private property;

d.	Have only enjoyed one housing subsidy;

e.	Have owned the existing flat for 5 years or more.

There are about 25,000 households who are eligible for the LBS in Singapore as of Feb 2009.