Voluntary Early Redevelopment Scheme (VERS). For many Singaporeans, that could well have been the biggest takeaway from this year’s National Day Rally speech by our Prime Minister (PM). For months, speculations have been rife about what is going to happen to the value of your homes when your HDB lease expires. Many Singaporeans are worried that their homes will become worthless.
In his National Day Rally speech, PM Lee announced that the government will introduce the VERS to tackle this emerging problem. VERS is a scheme that will allow homeowners to choose to sell the remaining lease of their HDB back to the government. This will be done through a collective sale similar to the Selective En Bloc Redevelopment Scheme (SERS). While VERS will only start in 20 years’ time, there are already questions that Singaporeans are eagerly asking about VERS. Here are six questions that every Singaporean would want to ask about VERS.
1. Which estate and when will it will get VERS-ed?
During his rally, PM Lee gave an indicative timeline for homes to be eligible for VERS. HDB flats which are 70 years or more can be VERS-ed if the residents vote for it. But will VERS be triggered by the 70-year mark or will it be decided by the government?
If the government is the one deciding which estate is eligible for VERS, there are multiple knock-on effects. For example, it can affect the compensation, especially if the compensation will be pro-rated based on the market rate and the length of the lease.
2. How much will you get compensated for your flat if you make use of VERS?
Another question in people’s mind is the fair value of your flat. Under VERS, the government will buy back your HDB flat for a reasonable compensation. PM Lee has made it clear that the compensation will not be as attractive as SERS. But still, reasonable compensation is a pretty subjective term. What is considered reasonable in the eyes of the government? Will you be paid according to the market rate for a flat in your estate? Or will you be compensated with a pro-rated market rate given that you have a shorter lease?
Let’s use the estate of Clementi for illustration. Today, Clementi flats are one of the most expensive BTOs in Singapore due to its good location and accessibility to amenities. Now, if you are going to vote for ‘YES’ to VERS your expiring flat, what is the fair value you should get back for your flat? Should your expiring flat be worth as much as (or more than?) the BTO in the Clementi estate with fresh 99 years lease? If not, what is the right pro-rated amount?
If you voted for VERS, you will likely need another home to stay. Will the compensation from the government be enough for your new BTO of the same size? Or will it be just enough if you choose to downgrade by one or two rooms, especially if you are staying in mature estates?
3. Where will your next home be if you use VERS?
Once you have sold your home back to the government, where will you stay next? Well, that kind of depends on how much you get compensated for. If you aren’t well compensated, then you can forget about getting a home of similar size in your current mature estate on the resale market. You might have to search elsewhere for a home that fits your budget with the proceeds you can get from VERS.
With SERS, you get to be invited to register and choose flats in a replacement site. For example, the latest SERS project of MacPherson Lane gives priority for homeowners to relocate to Circuit Road. SERS homeowners will be invited to register and choose their flats in the Circuit Road site first. Will VERS homeowners be extended the same kind of invitation at a replacement site?
For SERS, homeowners will also get an additional 10% priority when applying for BTO or SBF. The added benefit when applying for new BTO or SBF is also unknown for VERS. Will the same benefit be extended to VERS as well if you want to get a BTO or SBF instead of staying at the replacement site?
4. How will the voting system work?
According to PM Lee, VERS will be determined by a vote within your estate. This means that those affected homeowners will need to vote to decide whether the government buys back your home. But here’s the thing. How will the voting system work? Does it mean that your estate will be VERS-ed if more than 50% of residents vote to undergo VERS? Or does it require more than 50%, e.g. 75%? Or is it going to be like the regulation for short-term rental where the estate needs at least 80% consent?
5. What if your estate voted for ‘NO’ and you still need to sell your flat?
Let’s say that your estate decides that it doesn’t want to sell the flats back to the government. Now, there will be some of you who will need to sell your flat to fund your retirement. What happens to this group of people? How will the government reach out and help this group of people who are not financially independent for retirement? Will the Lease Buyback Scheme (LBS) be the only option for this group of people?
6. How is VERS going to differ from the Lease Buyback Scheme?
In conjunction with the announcement of VERS, the LBS was extended to all types of HDB flats, not just 4-Room or smaller flats. The LBS allows you to sell part of your flat’s lease back to HDB. You can then choose to retain the length of the lease based on the age of the youngest owner. The proceeds from selling part of your flat’s lease will be used to top up your CPF Retirement Account (RA). Your CPF RA will then allow you to buy a CPF LIFE plan to provide you with monthly income for life.
Now that there are two options for homeowners to unlock value in their home, how is VERS going to differ from LBS?
Read also: Is HDB Loan Refinancing a Good Idea?