Deferred payment scheme (DPS)
The deferred payment scheme allows the buyers of uncompleted properties start paying the developer at a later time compared to a standard scheme. Your financing cost, or the interest cost, is being subsidised by the developer.
Some bit of history
In Oct 1997, the Government allowed developers to offer to purchasers of uncompleted private residential, commercial and industrial properties the option to defer part of the progress payments due after the initial 20% downpayment, to a later stage. In Nov 2001, the Government further allowed developers to defer up to half of the initial 20% down payment up to the issue of Temporary Occupation Permit or any time before that. These DPS were introduced at a time when the property market was lacklustre and the economy was in recession. In October 2007, the scheme was withdrawn.
Are the DPS schemes today legal?
A definite yes! The rule applies only to uncompleted properties. This means any completed properties which obtained Certificate of Statutory Completion (CSC) are not affected by the rules.
What are the developments offering DPS or variants of it?
Capitaland is offering a Stay-then-Pay scheme for these two condominiums which allow the buyer to pay a 1% of the purchase price for the Option to Purchase, another 9% when exercising the option and the 90% balance can be paid after one year.
You can buy the unit with a 20% down payment, and pay the remaining 80% after two to three years.
A similar scheme with more phases of payments.
- 1% for Option to Purchase (OTP)
- 4% to exercise the option within 2 weeks from OTP date
- 15%: 2 months from OTP date
- 30%: 8 months from OTP date
- 50% : 24 months from OTP date
Buyers pay 20% down payment and get an option for a 2 year period. This means you lock in today’s price and decide if you want to exercise the option 2 years later and pay the remaining 80%. You can also rent out the unit for rental income for these 2 years. If you decide not to buy after 2 years, you get to keep the rental but the 20% is non refundable.
We have covered this development previously and it is the only development that has not obtained CSC. How does it work then?
This is an experiential leasing plan. You pay 10% upfront and 2.5% refundable security deposit to rent the apartment for two years. At the end of the lease, you can convert the rent paid as part of the down payment for the unit. If you decide not to buy, you get your 2.5% deposit back. You are renting the unit and deciding if you want to enter any purchase agreement with the developer two years later.
These schemes can help you manage your cash flow better by postponing the payments. They also appeal to buyers who believe the current property cooling measures will be loosened within this couple of years, causing prices to rise. If you would like to be kept updated on any new developer properties, subscribe here to get the latest news and of course, discounts offered.