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Senior to lose deposit on studio apartment as HDB loan not eligible

Studio apartment 170k

By Terry Xu

A Singaporean senior citizen, not aware that studio apartment is not eligible for loan from the Housing Development Board (HDB) lands himself in a situation where he is to lose his deposit and his would-be home for his new family.

In December 2011, Ben, in his fifties, applied for a Studio Apartment (SA) for $170,000 from the Housing Development Board. He subsequently paid a deposit of $8,500 for the SA to secure the application.

He have been renting a room at $800 for the past five years to stay in for the longest of time but as he wants to settle down in Singapore with his foreign fiancee and two children, he went to apply for a SA so to provide for a home for the two.

As HDB only recently introduced the sale of Built to Order flats to singles in 2013, when Ben decided to settle down with a family, he had no other options to choose from other than buying a studio apartment or to buy a flat from open market as a single.

After close to 4 years of wait for his would-be-family nest, Ben's Studio Apartment was to be ready for collection on 13 November, but he does not have the cash out-lay balance of about $93,000.

Ben had paid $10,323 for the deposit along with the other fees on the application with the assumption that Studio Apartment are also eligible for HDB Loan with the wrong notion that a HDB Loan is possible. In reality, HDB loan for SA is not possible. Ben is also unable to secure a bank loan as he had been made a bankrupt twice though he has already been discharged.

CPF rejects appeal for loan from retirement account.

appeal for loan
Appeal for loan from Ben's Retirement account.

The CPF Board has only approved Ben to utilize $79,763, out of his SA account balance of $120,000. As a result of that, Ben needs to pay a cash out-lay of about $93,000, which he does not have.

As he had not showed HDB any documents that he is able to pay the balance, HDB has cancelled his appointment to collect the keys but is allowing him to appeal till 13 November.

Ben had since sought the help of his MP of Radin Mas SMC, Mr Sam Tan and had concurrently written to Former Prime Minister, Goh Chok Tong and Prime Minister Lee Hsien Loong in Oct 2014 to appeal on his behalf to HDB for a HDB Loan, payable over a 10 years duration.

Despite having a pay of $1,800 (before CPF contribution) and writing to all possible individuals including the President of Singapore, all appeals were still rejected with HDB's standard response,

"The appeal was turned down and we reiterated that the HDB does not offer housing loan to SA buyers so that the elderly are not indebted in their old age."

Technicality of HDB loan does allow loan for Studio Apartments

HDB loan criteria

Ben is particularly puzzled about why HDB is unable to extend the loan to him as HDB's loan criteria for resale flats states that it is "allowed, if remaining lease can cover the buyer up to the age of at least 80" and he could essentially take up the 3rd option of paying the loan within ten years.

What struck Ben most was the statement he received from the HDB service staff when he dropped down to HDB personally to seek assistance.

He recalled the HDB officer saying, "You can write to the PM, so what? What can he do? He is not in charge of HDB, we are."

"If you reject my appeal, it is understandable but if you reject PM's appeal in this manner. This is going too far."

Ben currently rents a room at $1,000 a month and he worries that room rental in Singapore will soon reach $2,000 a month due to growing inflation.

He asked if such "debts" incurred via rental is considered as "indebtedness for the senior citizens of Singapore".

Ben, in his desperation, said:

"I would like to find a life partner for my old age, but without a basic roof over our head, how could we have a warm family?

So if I have more than $120,000 in my CPF SA account, and cannot afford a Basic Studio Apartment, how many more Senior Citizens will be in the same dilemma situations?

Do the Honourable PM and his team of Ministers have any Compassion and empathy to find a viable solutions for this pathetic senior citizen of Singapore?

Although I know the chances is slim, but do I have any other options?

Do we need to throw more 'Protest Vote' before PAP will listen to our plead?"

Ben's siblings and relative who are single face the same problem as him with a couple also having foreign spouses waiting to get a home of their own.

He said it would take a miracle for someone to give him a loan or to help secure a loan for him.

Why is a studio apartment with a 30 year lease so expensive?

What Ben is paying for his studio apartment is likely to be seen as exorbitant and this is not the first time someone has raised the issue of the pricing of Studio Apartments.

In August 2013, Mr Henry Lim wrote in the forum letters asking why SAs are priced so high.

"I AM a 60-year-old single Singaporean. I bought a 47 sq m studio apartment in March, which cost me $168,000 on a 30-year lease ("Why do studio units for seniors cost so much more than BTO flats for singles?" by Mr Henry Lim; Sunday).

The apartment cannot be resold on the open market or sub-let, and payment by instalment is not allowed.

Now, the HDB is offering new two-room flats to singles aged 35 and older, and has priced them much cheaper than the studio apartments for seniors. These new flats come with 99-year leases and can be resold after the minimum occupation period. Buyers are also eligible for generous grants and can pay by instalments.

Is this fair to the senior citizens who bought studio apartments?

After paying in full for my apartment, I have little left for health care and emergency needs.

Can the HDB explain its latest policy on two-room flats?"

HDB wrote a response to Mr Henry Lim saying:

"Build-To-Order (BTO) flats cater mainly to first-time home buyers.

To meet the diverse housing needs of home buyers, new HDB flats are available in a range of sizes, located in various towns and come with different designs and attributes. In addition, very significant housing grants and price discounts are offered to help lower-income families afford their first flats.

Studio apartments are built specifically to offer a monetisation option for some senior citizens who find their existing homes bigger than they need.

Studio apartments allow them, including those who have bought subsidised flats before or are living in private properties, to sell and hence, convert some of the value of their existing properties into cash for retirement needs.

They can achieve the same by buying two- or three-room flats in the resale market. Many may, however, find the pricing of studio apartments more attractive and do not mind the restrictions imposed on such units.

While studio apartments have a lease of 30 years, the price is not directly proportional to the length of the lease, as professional valuation principles take into account the time-value of money and other factors.

It is thus not appropriate to directly compare the prices of studio apartments with those of two-room BTO flats, especially if they are located in different towns with very different attributes. For example, earlier this year, Mr Soh had chosen to book a 45 sq m studio apartment, which is in a mature estate and on a high floor.

Home buyers should consider their options carefully and select a flat that best suits their budget and requirements."