Sale and Subletting of Flats under Enhanced Lease Buyback Scheme

Mr Png Eng Huat asked the Minister for National Development for the Enhanced Lease Buyback Scheme, whether HDB will consider relaxing restrictions on (i) the sale and subletting of the flat; and (ii) the minimum occupation period.

The Minister for National Development (Mr Khaw Boon Wan): If they have spare bedrooms, they can sublet them after taking up the Lease Buyback Scheme (LBS). Those who wish to move out and sell, or sublet their whole flat can already do so without the LBS. We do not have plans to relax the minimum occupation period which is applied to the purchase of all Housing and Development Board (HDB) flats.

I brought up this question because someone said, "If I sell my lease of x number of years to HDB, and then, the remaining part of the lease should still belong to the owner. Why is HDB putting a lien on the remaining part of the lease?" All HDB flats' sales will go through HDB, so you will know. Someone cannot just offload the flat

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somewhere else. So, why can I not have a say over the remaining part of the lease, like whether I want to sell or I want to sublet the whole unit? Is there a particular reason why there is a restriction?

Madam, when I answered the Member Ms Foo Mee Har's question just now, I simplified the explanation because it is highly technical. I try not to go into these technicalities, but I may have to do so now. The earlier example mentioned by Ms Foo Mee Har is that your property today still has 70 years of lease, but you decide to take half – 35 years. And so, you sell the tail-end 35 years. If it is a straight-line depreciation, it would be a 50-50 split. But I said no, because time-value-for-money and so on, it is actually about 60-40. It is not actually 60-40; if it is straight computation, it is 75-25. The tail-half of your lease is a lot less than the front-end of the lease which you are retaining. If you work on that basis, the cash proceeds under LBS will be much less than what we are offering today.

That is why HDB, quite rightly, introduced some conditions which are also practical conditions – you cannot sell, you cannot wholly sublet although you can sublet some rooms if you want to. And because of those restrictions, when valuers value the front-end of the lease to be retained, they take that into account and discount it. That is why instead of a 75-25 split, it ends up with a 60-40 split. So, 25 to 40 is a very significant improvement in the value which is now being sold back to HDB. That enables the LBS to be a lot more attractive and to be a lot more meaningful to the owners.

Thank you, Madam. I appreciate the Minister's explanation on net present value of cash and it is quite complicated. Could I ask whether MND will publish not only the methodology, but the figures they use in ascertaining the net present value of cash, because one can discount on different basis and by applying different percentages, their results could be quite different? So, if MND could publish the workings and the methodology, that may help explain things.

How valuers value properties is not secretive. As I have said, it is an established practice and there are tables which are published by valuers. If you are a valuer, you would know what to do. And the Singapore property market is a very mature, sophisticated market. We have leases of various lengths, various types, and transactions are going on all the time for decades, both in the public sector and in the private sector, whether it is en bloc in a private sector, or SERS or acquisitions and mergers by companies which involve properties. At every one of those transactions, there will be properties which are affected and have to be valued. And there are professionals who are being paid to do those computations properly. In the case of HDB, there is a due process too. If you do not like the value or you object to the value, you can appeal. And there will be an appeals board, which

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will be formed, again by experts who know the subject. They will see whether you have a case or you do not have a case. That is the way we have been doing it, and we have been doing it for decades, actually.