The first HDB flats were built in 1960. That was 61 years ago today. And with its 99-year lease, many HDB flats are now starting to mature past the 40 year mark. So what happens when your flat is nearing its end? - You may have heard about something called SERS, which is the HDB equivalent to en bloc. In fact, you might actually hope that your flat gets chosen for SERS. Who wouldn't?
In this article, we will be delving deep into SERS and VERS, what they are, what differs between them, what they mean for you if you are chosen and how to tell if you are eligible. Let's get into it!
(Image Credit: Gov.sg)
What is SERS?
SERS stands for the Selective En bloc Redevelopment Scheme. It was first implemented or introduced in August 1995 as a part of the Government’s efforts to renew older housing estates sitting on land with high redevelopment potential to ensure that Singapore remains vibrant city. So in a nutshell, the Government takes back flats before the end of the lease and redevelops them to revitalize older estates with new developments. SERS is also known to be very highly selective with only 5% of HDB flats being estimated to be eligible for SERS.
So what happens if you are selected for SERS? If you are lucky enough to get selected, it's like winning the property lottery as home owners are usually offered a very generous compensation package. When the Government takes your flat, they will give you money for it and give you the option to move into a new flat with a brand new lease of 99-years. If in the case you do not wish to move into the offered flat, you can still choose to apply for Built To Order (BTO) or Sale of Balance Flats (SBF) elsewhere with SERS rehousing benefits as well as 10% priority allocation or Re-Offer of Balance Flats (ROF).
Does my HDB flat have SERS potential? It's actually really hard to predict whether any HDB blocks have SERS potential. But there are some pointers you can look out for that are contributing factors the Government looks to in deciding whether a HDB block is deserving of SERS.
1. Your estate is mature (older than 30 years old minimum)
2. Your estate is in a central location
3. Your estate is near MRT
4. Your estate does not use its land space efficiently
5. There is a new BTO or alternative housing nearby your estate (to easily shift you and your neighbors into in the case of SERS)
6. The property market is booming (there won't be much SERS if the market is bad)
What is VERS?
VERS, or Voluntary Early Redevelopment Scheme, is a rather new concept that was first announced by Prime Minister Lee Hsien Loong in 2018 during the National Day Rally. The main difference between SERS and VERS is that, as the name suggests, VERS will be a voluntary scheme. This means that home owners are able to vote for the Government to buy back their homes before their 99-year HDB leases run out. This scheme however, is only offered to home owners with flats aged 70 years and older. A great advantage to VERS is that through VERS, more home owners will be able to benefit from redevelopment as compared to SERS where only a small percentage of home owners may benefit from redevelopment.
But what about compensation? That's another difference between SERS and VERS. The compensation package for VERS home owners will most likely be less generous as there will be less financial upside for the Government to take back these flats early. VERS will also allow the authorities to redevelop older HDB estates in an orderly way that is paced over 20 to 30 years, rather than crammed in 4 or 5 years like SERS.
As no HDB flats have reached its 70th year in its 99-year lease, we still have some time before we see a sample for VERS.
What happens at the end of a HDB 99-year lease
All land (except freehold land) belongs to the Government, whether it is 99-years, 103-years or 999-years. Which means that once your lease is up, the ownership of your land or property goes back to the Government. So what happens when your 99-year HDB lease is up? While there has never been a HDB block that has reached its full 99-year lease, we can take some notes from a recent case study where a piece of land was taken back by the Government due to its lease completion.
Geylang Lorong 3 held 191 units of terrace houses with a leasehold of 60 years. In June 2017, the Government announced that by the 31st of December 2020, owners of these terrace houses would have to return their properties to the State. By early December 2020, only 5 units have been returned to the State while 37 units were still owner-occupied and the rest were either vacant or used as foreign worker accommodation or for religious activities. And out of the 37 owner-occupied homes, 32 of them have found new housing while the 5 were struggling to find alternative accommodation.
This is when the Singapore Land Authority (SLA) stepped in. While the 5 owners consider their long-term housing options, the SLA offered them units by HDB under the Interim Rental Housing scheme upon their lease expiry. The Interim Rental Housing scheme is a scheme created in 2009 to help needy families with temporary housing at subsidized rates while they figure out their permanent housing solution.
So what can we learn from Geylang Lorong 3? We all know that when we sign to purchase a HDB that we won't have it as an asset forever. So the best thing that we can do is to always be prepared and have an exit strategy that we can rely on whether it be to sell your property early, purchasing a second property or by simply having a backup accommodation.
This is also something to keep in mind when we buy resale homes. If you do not get selected for VERS or SERS, a 99-year HDB can drop to zero value when the time is up, so the age of the home you buy is very important.
And when it comes to selling an old flat, make sure to not wait too long as finding a buyer might be quite difficult as banks seldom give out home loans on flats with a remaining lease of 35 years or less. There are also restrictions on usage of CPF funds to purchase units with less than 60 years of lease remaining.