Singaporeans are always looking towards the future. When people buy a new home, very often it has not been built yet. So, the buyer signs the sales and purchase agreement and then waits a few years for the property to be constructed.
Despite the long wait, this is a popular option as uncompleted properties are usually significantly cheaper than what they’ll be worth when they’re built.
To sweeten the deal, when making a purchase in a building that hasn’t been fully built yet, you have the option of paying for your new home progressively in stages, rather than all at once. This is called the progressive payment scheme.
Buying buildings under construction (BUC) properties
Buying property before it has been completed is very common in Singapore, and all those new condo launches you see popping up everywhere are examples of buildings under construction.
Here are some examples of current private buildings under construction as of July 2019.
- Sky Everton (condo)
- Haus On Handy (condo)
- Parc Esta (condo)
- Coastline Residences (condo)
- Parc Botannia (condo)
- Belgravia Green (strata landed)
Developers of private property typically follow the progressive payment scheme set out by the Housing Developers Rules. Although some modifications might be allowed, in practice the payment schedule is always more or less the same.
How does the Progressive Payment Scheme work?
Basically, the progressive payment scheme enables you to pay for a property according to the stage of construction is it at. Therefore, if construction gets delayed, your payment deadlines will also get pushed back.
What happens is that when each stage of the building is completed, the developers will send your lawyer a notice letting them know that you need to make your progress payment for that stage. Depending on your financing arrangements, you will either be called upon to make the payment in cash, or the bank giving you a loan will be contacted to release a disbursement.
The payment must reach the developer within 14 days of receipt of the notice from the developer, otherwise late payment charges will apply.
Here is a typical progress payment schedule for a condo unit.
|Stage||Percentage of purchase price|
|Upon signing Agreement / within 8 weeks immediately after date of Option||20% (includes 5% booking fee paid in cash earlier)|
|The following progress payments are due after the seller has given one copy of the Agreement to the purchase of his lawyer, and within 14 days of the purchaser receiving notice of completion of the following works:|
|Reinforced concrete framework||10%|
|Door sub-frames / door frames, window frames, electrical wiring (without fittings), internal plastering and plumbing||5%|
|Car park, roads and drains serving the housing project||5%|
|Building, roads and drainage and sewerage works in the housing estate, connection of water, electricity and gas supplies
(At this stage the Temporary Occupation Permit is typically released, meaning you can pick up your keys and move in)
|Final Payment Date and/or Completion (might be staggered further depending on when the Certificate of Statutory Completion is issued)||15%|
In terms of your home loan repayments, everything goes on as usual. Once the first disbursement is made, you can start making repaying your loan on a monthly basis.
Builders sometimes send notice of completion of more than one phase of construction at the same time, in which case you will be required to make more than one stage of progressive payments.
In addition, if you commit to buying the property some time after the launch (such as if you buy it from another buyer at a later stage), you might be called upon to pay several stages of progressive payments at once after the sales and purchase agreement has been signed.
Calculating progressive payments for your BUC property
Let’s say Mr and Mrs Moneybags have decided to buy a $1,000,000 condo unit. Here’s what they will pay at each stage.
After attending the sales launch, they decide on a unit.
- Booking fee: 5% x $1,000,000 = $50,000 (paid in cash at the launch)
They sign the sales and purchase agreement. At this stage, they must also pay stamp duty and legal fees.
- Upon signing the Sales and Purchase Agreement: 15% x $1,000,000 = $150,000
- 14 days from the completion of foundation works: 10% x $1,000,000 = $100,000
- 14 days from the completion of reinforced concrete framework: 10% x $1,000,000 = $100,000
- 14 days from the completion of partition walls: 5% x $1,000,000 = $50,000
- 14 days from the completion of roofing: 5% x $1,000,000 = $50,000
- 14 days from the completion of door sub-frames / door frames, window frames, electrical wiring (without fittings), internal plastering and plumbing: 5% x $1,000,000 = $50,000
- 14 days from the completion of the carpark, roads and drains servicing the housing project: 5% x $1,000,000 = $50,000
- Upon receipt of Temporary Occupation Period and collection of keys: 25% x $1,000,000 = $250,000
They move into their new property.
- Upon legal completion of the sale: 15% x $1,000,000 = $150,000
Want an easy way to calculate your progressive payments? Use MoneySmart’s Progressive Payment Calculator. Or, if you need a BUC home loan in Singapore, contact our mortgage specialists who can give you unbiased advice that is free of charge.
Do you have any questions about buying buildings under construction? Ask away in the comments!