Tuesday, October 16, 2012

Consequences Of Giving Up Your HDB BTO Flat

I had a long conversation with my sister regarding HDB BTO flats today. To my surprise, she revealed to me that she is intending to apply for a flat at either Queenstown or Toa Payoh in the upcoming November 2012 HDB Build-To-Order exercise with her boyfriend of 7 months. In my opinion, 7 months of relationship is far from stable and absolutely not enough to determine if her current boyfriend is 'the one' for her. Furthermore, she is only 21 this year and there is no need to rush into things, especially when stakes are high.

Several thoughts ran through my mind immediately:

What if they managed to get the flat but break up afterwards?
What are the penalties for giving up a HDB BTO flat halfway?
Will the downpayment and grant be forfeited?
Do they have to pay back the Additional Housing Grant in cash?
Will the first timer privilege be affected?

I kept these thoughts to myself in order not to dash her hopes. As an elder brother, I am naturally protective of my sister and hope that every choice she makes is the perfect one. This led to a two hour research on the penalties and forfeitures for giving up a HDB BTO flat.

Here are my findings regarding the consequences of giving up your BTO flat in the event of a break up:

Giving up your BTO flat after the online application

At this stage of the application, monetary stakes are still low and the only thing you forfeit is the administrative fee of $10 should you decide to give up. However, do note that if your queue number is within range (queue number less than the number of units offered), or in the case where you are invited to select a flat even if your queue number is out of range(due to applicants before you giving up their chances), HDB considers a cancellation as a rejection to select unit. Also, you will lose your first timer priority after two rejections.*

So if you have previously rejected a chance to select your flat, stakes are higher as this means you will be stripped of your first timer privilege for a year if you reject the chance to select a flat for the second time. In addition, any additional chances accumulated from the previous unsuccessful applications will be set to zero if you reject to select a flat.

*From HDB Website : "To manage the growing trend of repeated non-selection of flat by First-timers, First-Timer applicants who reject 2 chances to select a flat will have their First-Timer priorities removed for a period of one year. If they apply for a flat in any HDB sales exercise within that one-year period, they would no longer enjoy the above priorities for First-Timers."

Giving up your BTO flat after unit selection but before signing Sales Agreement for Lease

By this stage, you would have already paid the option fee and selected your desired unit. Stakes are higher now. By giving up your BTO flat after booking a unit, the option fee* that you paid during flat selection day will be forfeited. Also, according to a new HDB regulation, buyers who cancel their bookings after putting down an option fee will now be barred from buying BTO (Build-to-Order) and resale flats with housing grants for a period of one year.

*Option fee for 4/5 room : $2000
 Option fee for 3 room : $1500
 Option fee for 2 room : $500
 Option fee for studio apartment : $250

Giving up your BTO flat after signing Sales Agreement for Lease

Now, things are turning ugly and stakes are getting higher. By now, you would have already paid the stamp fees and downpayment through your CPF/Cash/Additional Housing Grant (AHG).

5% of the flat purchase price and expended legal and stamp fees will be forfeited should you give up your BTO flat at this stage.

So if you are eligible for the Staggered Downpayment Scheme and paid 5% of the purchase price as downpayment, nothing will be refunded. If you paid 10% of the purchase price as downpayment, half of it (5% of purchase price) and the expended stamp and legal fees will be forfeited.

Also, if you were granted the Additional Housing Grant, you have to pay back the disbursed grant with interest in cash

Similarly, you will be barred from buying BTO (Build-to-Order) and resale flats with housing grants for a period of one year.

In conclusion, be sure that your partner is 'the one' for you before applying a HDB flat with him/her. Stakes are high and giving up your HDB flat halfway can have a huge impact on your finances. I guess I will have to talk to my sister about this someday.