What actually happens when HDB confiscates your flat?

There is an ongoing argument about whether Singaporeans really own their HDB flats, or whether they're just renting them on a lease.

One thing that tips the balance in favour of the latter argument is the fact that the HDB has the right to confiscate or repossess your flat if you do something unacceptable in the eyes of Big Brother.

In 2014, two HDB flats were confiscated from their owners, who rented them out to tourists on Airbnb.

In fact, from 2012 to 2014, 202 flats were seized by the HDB because their owners had committed infringements like illegal subletting or buying private property before their Minimum Occupation Period was up, or had failed to repay their home loans.

But what does that actually mean? Can the government just take your home away from you?

The HDB usually offers some compensation when they repossess a flat.

The word "confiscate" brings to mind teachers taking away students' mobile phones as punishment.

Likewise, repossession of an HDB flat is indeed a punishment.

But would HDB really take away your home, one which you might have spent your whole life paying for, and leave you destitute on the streets?

Not exactly. The HDB usually offers some form of monetary compensation when flats are compensated, just so you aren't left destitute. That's the good news.

But it's peanuts, and you will still lose money

The bad news is that this compensation isn't going to be much.

You will be offered only the amount you originally paid for the flat, MINUS a penalty.

When you consider capital appreciation, you are actually losing a lot more than just the penalty.

If your flat is repossessed because you broke the rules, you can generally expect your compensation to be much lower than what you'd receive for selling it on the resale market.

For instance, a real estate agent whose Bukit Batok flat was repossessed due to illegal renting was reportedly paid $125,000. He had bought the flat for $150,000, and it could have been sold for about $320,000 on the resale market at the time. That's a loss of almost $200,000. Ouch.

In addition, you may also be subject to fines or other penalties for breaking the rules.

It seems the HDB's approach is to offer you just enough to keep you off the streets, but no more.

HDB might help you find alternative accommodation if your flat is repossessed due to mortgage arrears

For those whose HDB flats are confiscated because they broke the law, good luck. You're on your own.

But for those whose flats get taken away because they couldn't repay their home loans, HDB should help you to find alternative accommodation.

This means that it will be easier for you to be allocated a smaller flat if you can afford one, as well as to get an HDB loan to finance it.

You might also be offered a rental flat if you can't afford any other housing options, but be warned that HDB will try to get you to move in with family members first.

For some HDB owners, getting having a flat confiscated is tantamount to losing their life savings or kissing their retirement goodbye. Moral of the story? Never try to bend the rules when it comes to HDB property, as the consequences are disproportionately grave.

This article was first published in MoneySmart.