HDB Flat Sellers Turn To Illegal Deals

Some HDB flat sellers are getting into illegal deals with their buyers to overstay in the sold flat, past the legal date that they have to vacate the flat.
These sellers are forced into such deals due to the recent cooling measures introduced for the property market, reported The Sunday Times (ST).
The new rules state that if HDB owners hope to get an 80 per cent home loan for a new flat, they have to prove sale of their previous flat through an official letter from the HDB.
Otherwise, these sellers can only get 70 per cent financing for their new property and have to pay 10 per cent more in downpayment.
However, the HDB letter is usually issued only some six weeks before the legal completion of the sale – a timeframe that is too tight for sellers to find another flat, renovate it and move in, noted the same paper.
Property agents told ST more than half of resale transactions are affected.
They also pointed to HDB upgraders as the most affected because they are not cash rich and cannot afford to pay the additional downpayment costs.
To give themselves more time, some sellers then engage in verbal or written agreements to overstay in their sold flat, perhaps by renting it from the new owner.
This move is illegal as under HDB rules, a buyer must live in this flat for at least five years before renting it out.
Other HDB sellers may choose to look for short-term rentals of one to three months, but this means they not only have to move twice but also face difficulty securing such rentals since most contracts are for at least six months.
PropNex chief executive Mohamed Ismail suggested allowing 80 per cent financing for all HDB home owners but they must sell their homes within three to six months.
He argued that since no household is allowed to own more than one HDB flat, he doesn’t see why the new rules have to apply to HDB owners.
Chairman of the Government Parliamentary Committee for National Development and Environment and West Coast GRC MP Cedric Foo agreed and told ST that HDB owners who move to other HDB flats are unlikely to be property speculators and added that it was worth raising this issue to HDB to see if there are alternatives. Read more at http://sg.yfittopostblog.com/2010/10/24/hdb-flat-sellers-turn-to-illegal-deals/