SINGAPORE – The Housing Board has announced changes to how it will disburse housing grants for those looking to buy HDB flats. Also, from Tuesday, HDB loan and housing grant applicants will have their incomes assessed over a period of 12 months, instead of three or six months.

The HDB loan eligibility letter is now replaced with the new HDB flat eligibility letter (HFE), which the board said will give buyers a clearer picture of their purchase costs and financing options.

The Straits Times answers questions about the changes.

Q: What do the changes in the income assessment period mean for buyers of HDB flats?

A: Applicants do not have to be employed for a full 12 months, but must be working at the point when they apply for the HFE letter to be eligible for HDB loans. But to be eligible for the Enhanced Central Provident Fund (CPF) Housing Grant, they need to be employed for the full 12 months.

The cut-off date of the income assessment period is two months before an applicant applies for an HFE letter.

HDB said on Monday that standardising the assessment period at 12 months – instead of three or six months previously – allows for more consistent assessments as jobs are fundamentally different in various ways, including remuneration structures. This will enable a clearer assessment of applicants’ income levels, especially for those whose incomes fluctuate from month to month. The new guidelines will apply when buying executive condominiums from property developers, and to schemes such as the Lease Buyback Scheme and Silver Housing Bonus.

Q: What if a household’s combined monthly income exceeds the $14,000 ceiling, but its average income across 12 months does not?

A: Applicants who exceed the household income ceiling of $14,000 can still be eligible for HDB loans and housing grants, as long as the household’s average income across 12 months is under the cap.

Mogul.sg chief research officer Nicholas Mak said the longer assessment period allows more people to be eligible for HDB loans and housing grants. “This is a more holistic way of looking at an individual’s income, and it puts less pressure on the authorities to increase the income ceiling, which would affect the wider housing market.”

The change means more applicants would be eligible for HDB loans, which carry a concessionary interest rate of 2.6 per cent – pegged at 0.1 percentage point above the CPF Ordinary Account (OA) interest rate.

First-time buyers of two- to four-room HDB flats can get $80,000 in grants under the CPF Housing Grant, while those who buy five-room or larger units can get $50,000. First-timers buying HDB resale flats can also tap the Enhanced CPF Housing Grant, which gives up to $80,000 in grants for families, and the Proximity Housing Grant of up to $30,000 for families.

In all, first-timer families can receive up to $190,000 in grants when buying a resale flat.

Q: How do I use my housing grants if I am an occupier and do not co-own the flat?

A: Housing subsidies will now be split equally between a first-timer applicant and occupier who form a core family nucleus.

Previously, all housing grants would be credited to the main owner’s CPF OA. A couple purchasing an HDB flat have the option to list one spouse as an essential occupier, with the other as the main owner who will finance the flat. An essential occupier is a family member “who forms a family nucleus with the applicant to qualify for a flat from HDB”, according to HDB’s website. An essential occupier does not have a share in the flat, even if he contributed cash to finance it.

With the changes, the main owner will receive only half of the grants, while the other half will go into the occupier’s CPF OA.

The occupier will not be able to use his grants to fund the current flat. In the future, he will be able to use the grant only for public housing – HDB flats and exec condos from developers. He cannot use the grants for private properties or investments.

These funds will gain interest at the OA interest rate of 2.5 per cent per annum.

An HDB spokesman said the main applicant “may wish to consider listing the core occupier as a co-applicant instead, if they would like to use the full grant amount for the flat purchase”.

After the flat reaches its minimum occupation period (MOP), the occupier can buy a private property as a first-time buyer, allowing him to avoid paying the additional buyer’s stamp duty (ABSD).

Huttons Asia senior director of research Lee Sze Teck said the change will create uncertainty in the HDB resale market as not every buyer will be able to use the full grant. “It may cool down the exuberance created by increasing the housing grant (in February 2023). However, there is no impact on the private housing market as the essential occupier can buy a private property after the MOP.”

But Mr Mak said splitting the housing grants is not enough to discourage this method of avoiding ABSD.

“The potential financial gain from investing in a private property outweighs the inability to use the housing grants to finance the purchase of the flat initially,” he said.

“Furthermore, the HDB is rewarding the occupier by letting him keep the housing grant in his CPF account and earn 2.5 per cent interest in the meantime.”

He added that it would be more effective to label both the applicant and the occupier as co-owners of the HDB flat, so they would have to pay the full ABSD when buying a private home as their second property.

Q: If I am a Singaporean and my spouse is a permanent resident (PR), will the grants be disbursed to my spouse?

A: Yes, the grants will be disbursed to both the Singaporean applicant and the PR.

Previously, housing grants would be disbursed only to the Singaporean applicant.

Q: If I am buying a flat with my child, will the grants be disbursed to my child?

A: No, the full grants will be disbursed to the parent, even if the child is helping to finance the flat.

The child will still be considered a first-timer buyer if he chooses to buy a flat in the future.

HDB said a first-timer child who is part of a core family nucleus with his parent will not be treated as having enjoyed the subsidy if he is single and listed as a co-applicant. He will also not be treated as such if he is listed as an occupier and is married or single.

Q: If I have a valid HDB loan eligibility (HLE) letter, do I need to apply for the HFE?

A: No, as long as the HLE letter is valid, the applicant does not need to apply for the new HFE.

However, when the buyer’s intent to buy or HLE letter has expired, he must have a valid HFE letter before he can be granted an option to purchase by a resale flat seller.

As of Tuesday, the flat-buying process is streamlined so that buyers just need to make a single application to get the HFE letter informing them if they are eligible to buy a new or resale flat, how much of the housing grants they can use and the HDB loan amount they qualify for.

Previously, the three aspects were assessed separately at different stages of the home purchase process.