Deferred Payment Schemes in Singapore

The Deferred payment scheme is an extended payment plan program agreed upon between property developers and individual buyers. 

This plan allows the buyer to make an initial downpayment of 20% to 30 % of the actual property price and then move into the property as a resident.

There is also a 5 % option fee associated with the purchase. 

The new owner is only required to start paying the rest of the amount after 2 to 3 years have passed. 

This means that you won’t have to make any payments for your outstanding home loan during the initial 2 to 3 years. 

So, you can effectively start living in your brand new home without worrying about making those hefty payments for the initial few years. 

To understand how the deferred payment scheme became popularised in the first place, we have to look at some of the policies enacted by the government on property developers when it came to dealing with property tax. 

Now, for those of you who are not aware of this, the Singapore government imposes certain taxes on property buyers in the form of stamp duties. 

While these are minuscule charges if looked at individually, certain instances of stamp duty can result in a very costly financial obligation. 

One such form is the additional buyer’s stamp duty which has to be paid by anyone who purchases multiple properties in Singapore. 

This can be especially burdensome to a property developer whose job requires purchasing and investing in multiple properties. 

The usual rate for ABSD for property developers is a whopping 25 %, plus the extra 5 %, which has to be paid to the Singapore government. 

So technically, a property developer who buys a piece of land for development purposes would have to dish out 30 % of the land’s price just to pay the additional buyer’s stamp duty. 

The only way they could avoid paying this tax is by somehow managing to sell all housing units within 5 years. 

If you think that was bad enough, wait till you hear the rules for foreign developers making property investments in Singapore. 

Foreign developers had to abide by the qualifying certificate regime (QC) rules, which stated that they had to finish the development project and sell all units within 5 years. 

Failure to do so would mean incurring an additional penalty of 24 % on top of the ABSD tax, which they have to pay regardless. 

So now the question was, how to find buyers to buy these units within the next 5 years? 

Now, as we all know, the property market is one of the slowest moving markets in the world. 

It’s not like buying cars or stocks where there is an abundance of buyers around the corner. 

People who buy property do so after years of consideration and financial planning. 

So as you can imagine, buying a property isn’t a simple matter of walking up to a property dealer and purchasing an asset unless you’re some kind of billionaire. 

Well, with the help of DPS, developers could boost the sale of housing units much faster than under normal circumstances.

The biggest catch of the DPS method is the rise in property prices. 

It isn’t uncommon for developers to write off the property with slightly increased valuations. 

For example, let’s say that there is a condo for sale at a property price of $ 1.5 million. 

Now, this is the price under normal circumstances; however, you might find that the same property would have an increased purchase price under the DPS scheme. 

Under the deferred payment scheme, the same condo could cost around $ 1.8 million instead of the original $ 1.5 million. 

While all this may sound interesting , it is important to note that the deferred payment scheme for most properties has been effectively discontinued since October 2007. 

The reason is that it contributed to wide-scale price rises in the property market, which ultimately put a financial strain on buyers. 

Nowadays, you might find various developers offering variations of the DPS scheme, such as the Reserve scheme or the Pay and stay scheme. 

Although they have different sounding names, make no mistake, these are DPS schemes with variations in booking fees and completion periods.

It’s important to note that the new regulations state that only units that are fully completed and have a Certificate of Statutory Completion (CSC) can be allowed to use the kind of payment schedule that comes with DPS.

The driving factor of DPS payment plans has to do with three important factors that every property buyer deals with. 

The amount of the booking fee required, the exact timeframe when the option to purchase needs to be exercised, and the amount of time the completion period is deferred for. 

Under normal circumstances, a property buyer has to pay a 25 % downpayment, 5 % of which must be paid in cash, while the remaining 20 % can be paid in cash or CPF savings. 

On top of that, the buyer has to pay the necessary stamp duties within the next two weeks of exercising his/her option to purchase. 

Then, the buyer has to start paying progressively increasing monthly installments within approximately 9 months. 

Now, if the buyer buys the resale property, they would also have to pay the 25 % downpayment and deal with the stamp duty payments within two weeks of the OTP. 

Then, they would have to start paying the remaining 75 % loan within the next 10 to 12 weeks approximately. 

So technically, they would have to start paying the monthly installments upon completion as the loans are disbursed fully. 

DPS helps give the buyers and developers loads of flexibility when it comes to the installment payment plan. 

Let’s take a look at some examples to better understand the benefits of the deferred payment scheme. 

Let’s say that you want to upgrade your home, but your outstanding loan on the property is making it difficult for you. 

Now, according to the regulations of the Monetary Authority of Singapore, you would have to put down 25 % in cash for the initial downpayment; then, you would need another 25 % in either cash or CPF savings. 

All this just to be eligible for a maximum loan of 50 % of the property price, and not to mention; there’s the additional buyer’s stamp duty to deal with. 

Now, if you were to qualify for a DPS scheme where you are allowed a longer deferred completion period, you could reduce your down payment to 10 % in cash and have the choice to move into a new home early on. 

This would give you plenty of time to sell off your previous home, and having done that, you could qualify for a loan of at least 75 %. 

Now, let’s take a look at another example; say you want to buy a property but do not prefer the current ABSD rates. 

Naturally, you’d want to wait and buy it at a later time when the rates are lower; however, you don’t want to sit idle at the moment. 

A deferred payment scheme could actually help you in this case, and here’s how. 

All you have to do is use a fraction of your cash to make the downpayment on your new property. 

Now that you already own the property, you could wait until the ABSD is revised at a later date and only then start making the payments on your home loan. 

What’s more, if you’re an investor, you can sell the property anytime during those 2 to 3 years without having to pay any seller’s stamp duty. 

As for the money required for the loan, you could actually get that by renting out your property during the initial years. 

So, therefore, you will have essentially only paid 20 % of the property to buy it, then you would be generating the rest of the money required by using the same property as rent.

Although allowing massive benefits to the buyer, the Deferred payment scheme does come with its own disadvantages. 

First of all, any property you buy under the DPS scheme will automatically see a price increase of at least 5% to 10 %. 

This is natural because developers have to be compensated for the initial years of delay when it comes to making the payment. 

Another disadvantage here is that your loan to value ratio can potentially become lower under the DPS scheme. 

This is because the loan that you take from the lenders is based on the newly adjusted purchase price of the property. 

So naturally, they have the choice to deduct any rebates, cancel any benefits and remove any discounts associated with the sale. 

Finally, first-time buyers might find it more advantageous not to use the DPS scheme. 

That’s because a normal payment process can potentially qualify you for a bigger loan amount.

Although allowing massive benefits to the buyer, the Deferred payment scheme does come with its own disadvantages.

First of all, any property you buy under the DPS scheme will automatically see a price increase of at least 5% to 10 %.

This is natural because developers have to be compensated for the initial years of delay when it comes to making the payment.

Another disadvantage here is that your loan to value ratio can potentially become lower under the DPS scheme.

This is because the loan that you take from the lenders is based on the newly adjusted purchase price of the property.

So naturally, they have the choice to deduct any rebates, cancel any benefits and remove any discounts associated with the sale.

Finally, first-time buyers might find it more advantageous not to use the DPS scheme.

That’s because a normal payment process can potentially qualify you for a bigger loan amount.

Eligibility For Deferred Payment Schemes

According to the Monetary Authority of Singapore, you may be eligible for a Deferred payment scheme under the following circumstances.

In the case of home mortgage payments, you are not required to show any impact from the Covid-19 pandemic as long as you don’t have any mortgage repayments that are 90 days past the due date. 

This regulation started being in effect on the 6th of April, 2022.

The next regulation has to do with credit card debts and credit lines regarding unsecured credit and their repayment. 

Any borrower who was impacted with a 25 % loss in income during the pandemic has the option to convert the debt into a term loan for a 5-year tenure. 

What’s more, such loans will have interest rates capped at 8 % annually. 

In the case of deferred premium payments for health & life insurances, the policyholders facing any financial troubles will have the option to defer the insurance premiums for up to 6 months. 

On top of that, any policyholder facing financial issues with payment of general insurance will have the option to make their payments via an instalment payment plan. 

EC Deferred Payment Schem

Buying an executive condo under the deferred payment scheme presents you with some advantages.

First of all, you only have to make instalment payments after receiving the Temporary Occupation Permit. 

So basically, you can put down a 20% downpayment while the remaining 65 % can be paid after getting a notice for a temporary occupation permit. 

This is highly beneficial as you won’t have to deal with two different mortgage loans at the same time.

The only downside is that if you buy a new launch EC using the DPS scheme, you usually have to pay 2 % to 3 % higher than what you would have to pay under a normal progressive payment scheme. 

Some Major Condos in Singapore Offering DPS

The Boutiq@Killiney

Located at 145 Killiney Road in prime district 9, the Boutiq@Killiney is just a short drive away from the popular Orchard Road. 

This property is one of the few that offer deferred payment schemes among executive condo developments.

However, the payment scheme here might be a bit more complicated than most properties. 

You only need to pay a 1 % booking fee to get your OTP; then, you can pay the remaining 4 % within a period of 2 weeks. 

You can pay 15 % for 2 months from the date of OTP, 30 % for 18 months, and 50 % for 24 months. 

The Crest

This is another popular condo in Singapore that offers the DPS scheme. 

It is located at Prince Charles Crescent and allows you to use a payment scheme called the preferential payment plan, which is an alternative form of DPS.

This essentially means that you can pay 7 % of the property price initially before moving in, pay the next 8 % the following year, and finally, pay the last 5 % in the year after that. 

Lloyd SixtyFive

For this prized new launch condo, you can make a downpayment of 10 % of the market price as rent, plus a 2.5 % security deposit under the experiential leasing scheme. 

You can immediately move into the property after this initial payment and pay a monthly rent of $ 6,750 for a one-bedroom unit. 

The security deposit is refunded after two years, and the rental amount is directed towards the actual property payment. 

Meanwhile, if you decide not to buy the property, you are only refunded the deposit and not the rent amount. 

The Interlace And d’Leedon

Both these properties offer the Stay then Pay scheme, which virtually allows you to buy units from these buildings by paying 10 % of the purchase price upfront. 

You can then pay the remaining 90 % after a year, while foreigners will have to pay 15 % of the property upfront and the remaining 85 % after a year. 

OUE Twin Peaks

This property offers both the normal DPS scheme and an alternative where you can pay 20 % of the purchase price upfront and then pay the remaining 80 % after a year. 

Naturally, if you use the DPS scheme, the overall price of the unit will cost a lot more, meanwhile, there will be no price increase under the alternative scheme. 

What is a Normal Payment Scheme

The Normal Payment Scheme, also known as the Progressive payment scheme, requires you to make an initial booking fee of 5 % to 10 %. 

After that, you are supposed to pay the stamp duty within 14 days of exercising the option to purchase. 

Then, you have to pay the remaining downpayment within 8 weeks of paying the booking fee. 

After this point, all payments are to be paid only after certain milestones in the construction of the property have been reached. 

Below is the timeline for the payments under the progressive payment scheme. 

• After building foundation/framework of unit = 10 % payment.
• After finishing reinforced concrete work = 10 % payment.
• After finishing of partition walls = 5 % payment.
• After building of roof = 5 % payment. 
• After finishing door frames, window frames, electrical wiring, plumbing, and internal plastering = 5 %
• After building Car parks, drainage lines, and roads = 5 %
• After finishing building, drainage, roads, water connection, sewage works, electricity and gas supplies = 25 %
• Final payment made after the end of the project = 15 %

Under the old deferred payment scheme, buyers had to pay a universal percentage of the deposit amount.

However, the DPS scheme has been discontinued and is now only allowed for certain properties at varying rates. 

Let us take a look at some of the properties that offer variations of the DPS and the different rates of down payments that are valid in each case. 

Reflections @ Keppel Bay offers the Stay and Pay scheme and charges a downpayment/deposit of 19 %.

Corals @ Keppel Bay offers two different DPS schemes with different downpayment rates. 

DPS1 offers you a downpayment of 19 %, while DPS2 offers a 9 % deposit. 

Marina one Residences offers a standard DPS scheme and charges you a 19 % downpayment. 

South beach residences offer two DPS schemes, both of which charge a 19 % deposit with varying deferment periods. 

8 St Thomas offers a Stay and pay scheme at a 19 % deposit; and also a Reservation scheme with a 9 % deposit.