Ever since the month of August 2018, Mr Lawrence Wong, the National Development Minister of Singapore, said that solutions are being searched when it comes to the Central Provident Fund and the purchase of older apartments offered by the HDB for resale. The changes that are about to be made, concerning the loan rules of this fund, will become effective starting with the month of May 2019.
What kind of changes can people expect?
The CPF has quite a few restrictions when it comes to HDB flats, one of these restrictions concerning the ability to purchase residences that has less than 60 years remaining in their lease term. But, it is worth mentioning that there are more than 90,000 flats that are already over the age of 40, which means that many won’t be accessible through the fund.
Minister Lawrence Wong said that this particular restriction is addressed among the aspects treated by the coming changes. This is due to the fact that many banks take the restriction into account as well when they work on deciding how much money to offer as a loan to their customers. Thus, not just the CPF is reduced, but also the loans offered for the purchasing of an apartment belonging to the previously mentioned group. This rule was made so home buyers can enjoy a bigger degree of protection when it comes to their retirement fund. However, it also generated a set of consequences that were not foreseen when this rule was created.
A good example would be the case of purchasing a flat that is 39 years old. In this case, the buyer could make full benefit of his CPF fund. But, if he will want to make the purchase one year later, the flat would end up under the “less than 60 years” condition, and he will have to face restrictions on his CPF fund. It is easy to see that the restrictions make no sense, considering that the apartment is just one year older than it was when the entire fund was available. According to the Minister, the aim is to offer people flats with leases that will last an entire lifetime. When this is possible, rules so restrictive make no sense and they should not be used anymore.
So, starting with May 2018, we should expect seeing more relaxed rules when it comes to using the CPF, especially when it comes to older HDB apartments. Let’s not forget that they make a considerable amount among the available residences for sale in the country.
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