Changes in the Central Provident Fund loan rules on the purchase of older Housing Board resale flats will be announced soon for implementation in May this year, National Development Minister Lawrence Wong said yesterday.
At issue is the restriction on using CPF to buy flats with less than 60 years of lease remaining. About 90,000 of the total stock of about one million HDB flats are more than 40 years old. "Some banks take reference from these CPF restrictions when assessing how much loan to extend. As a result, both the CPF and loan quantums may be reduced for the purchase of such flats,"said Mr Wong.While the CPF rule is intended to safeguard the retirement adequacy of those who buy older flats, its design has led to some unintended consequences, he noted.
"For example, if a buyer would like to buy a 39-year-old flat, he can use full CPF; but one year later, because you hit this less-than-60-years requirement, the amount of CPF will be restricted. And there is no good reason why this should be so just because the flat became one year older," he said in Parliament.
"In fact, the focus should not be on the remaining lease of the flat. What we want to ensure is that buyers purchase flats with leases that are long enough to last them for life. If that is done, we can relax CPF usage rules, even if the remaining lease is less than 60 years."
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