What is a Progressive Payment Scheme (PPS)?
The Progressive Payment Scheme (PPS) is applicable to properties in the construction process, commonly referred to as Buildings Under Construction (BUC).
As its name implies, PSS allows homebuyers to increase payments as the development progresses. This typically ranges from 5 to 10% of the property purchase price at specific milestones during construction. In the case of resale condos, a 25% down payment is required, and monthly repayments begin immediately.
For instance, you would make an instalment to the developer upon completion of the foundation, another payment when the walls are erected, and a further one when the roofs are prepared.
The benefit of this scheme is that it offers lower initial monthly repayments, and even if delays in the developer’s timeline or milestones are not met, the loan repayments remain unchanged.
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How does a Progressive Payment Scheme (PPS) work?
The process works in such a way that once a particular stage of the construction is finished, the developers will inform your lawyer through a notice about the required progress payment for that stage.
Depending on your financing agreement, you must either pay in cash, or the bank providing the loan will be notified to release a disbursement.
The payment must be made to the developer within 14 days of receiving the notice, as failure to do so will result in the application of late payment charges.
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What are the stages in the Progressive Payment Scheme (PPS)?
The following are the stages of construction for a property under the BUC loan, along with the corresponding percentage of the purchase price that is typically disbursed at each stage:
- Foundation work: 10%
- Reinforced concrete work: 10%
- Partition walls: 5%
- Roofing: 5%
- Door sub-frames, window frames, electrical wiring, internal plastering, and plumbing: 5%
- Car parks, roads, and drains serving the housing project: 5%
- Building, roads, drainage, sewage works, and the connection of utilities: This stage marks a significant milestone as the Temporary Occupation Permit (TOP) is typically released. At this stage, 25% of the purchase price is disbursed to cover the remaining construction works.
Buyers can collect their keys and move into the property after obtaining the TOP.
- Final Payment Date and/or Completion: The final stage involves the remaining 15% of the purchase price being disbursed, which may be further staggered depending on when the Certificate of Statutory Completion (CSC) is issued.
The CSC signifies the completion of all construction works and grants full legal status to the property.
What should I know about the Progressive Payment Scheme (PPS)?
Builders may issue a notice of completion for multiple construction phases simultaneously, requiring buyers to make several stage payments simultaneously. This typically occurs when purchasing a property from another buyer at a later stage, after the initial launch. In such cases, buyers may be expected to fulfil several progressive payment stages together after signing the Sales and Purchase Agreement (S&PA).
It is important to note that the payment process can vary across different new launch condo projects. Therefore, buyers should be aware that the specific payment terms and arrangements may differ for each project.
