Several developers consider giving payment extensions to home buyers when they encounter difficulty in paying up if the projects obtain Temporary Occupation Permit (TOP).Buyers on a Deferred Payment Scheme (DPS) will pay up a large piece of the selling price then.
Developers may provide buyers with a longer time of payment, or figure out a payment programme for these buyers to complete the acquisition of their units.
BT understands that several developers are ready for this contingency for projects in Sentosa, Districts 9, and District10.
Several developers can already allow buyers to send in payments not on time. A banker who deals with property investments for buyers from abroad said that in many cases, developers were allowing his clients to send cheques for their residences 3 or 4 months late. “They are not chasing them for the money”, he said.
Cheang Kok Kheong, the chief operating officer of Frasers Centrepoint Homes told BT that the group contains two housing projects for Temporary Occupation Permit in the third quarter of 2009 – One St Michael’s and One Jervois. “Based on the prices at which we sold to DPS customers and the current market prices, there’s still a comfortable gap in favour of our DPS buyers. If buyers have difficulty getting loans, from an economic viewpoint, the best thing to do would be to sell their units in the market”, he stated. Frasers Centrepoint decided not to extend the Deferred Payment Scheme to sub-sale purchasers.
Analysts stated that not all developers can help worried buyers. If cases of problems are few, these developers can use existing cash flow in order to accept payment extensions. However, if the occurrence is extensive, developers need their own bank support before providing buyers with a breathing room.
Repayment schemes should be customised in accordance to the circumstances of buyers and they should prove that they are encountering financial difficulty.
Under the arranged Sale & Purchase Agreement, developers of private properties are allowed to take interest from purchasers who paid later than the 14-day cut-off date. This interest is computed on a daily basis at two percent rate over the average of the existing prime loan rates of the three local banks.
This year, the City Developments Ltd (CDL), expecting that City Square Residences will get TOP, noted BT,”to date, only a small number of DPS clients have approached us for help”.
Developers are balancing other options, which include asking purchasers if they will agree to exchange units for smaller units so as to lessen their financial obligation. Several developers will assist buyers to find tenants who will aid them to generate investment cash flow. Far East Organisation employs an in-house renting group to search for tenants. This scheme started in 2006, and can well get some impulsion during these difficult times. A few developers were assisting DPS buyers to apply for loans by presenting them to bankers.
Innovative financing schemes mimicking the DPS are abundant as developers attempt to make their residences more attractive. The developer at Roxy Homes’ Nova 88 has engaged with OCBC Bank in order to take in the interest rate from buyers during the period of construction. Buyers who got a bank loan, does not need to pay to the bank until the TOP. Afterwards, the buyer should begin making loan payments.