EXECUTIVE CONDOMINIUMS
First introduced around 1996, Executive Condominiums were positioned as a class of property catering to the "sandwiched class" - upgraders or aspiring property owners who wanted to acquire a private residential property but yet found that prevailing condos were out of reach.
Fast forward more than 20 years later, Executive Condominiums have gained immense recognition as profit making investments.
See : Executive condos gain cachet as resale units generate windfall profits, The Straits Times, Jan 2023
A majority of the sampled 4,806 EC units were resold within 10 years from the purchase date and netted around $314,000 in gross profits each. In 2021, a resale EC unit at CityLife@Tampines snagged a record gross profit of $1.38 million, followed by another unit at The Quintet in Choa Chu Kang, which scored $1.02 million in profit.
If you are looking to purchase a New Launch Executive Condominium, one of the key aspects to understand is the payment structure. In this article, we discuss the NPS (Normal Progressive Scheme) and DPS (Deferred Payment Scheme) payment modes.
First, a quick note on the Launch Timeline of a new Executive Condominium.
The Singapore government releases land plots under the GLS (Government Land Sales) programme, which allocates land for Developers to bid and develop residential housing.
For Executive Condominiums, the land plots are released under HDB, and they can be either released into the:
At the end of the Tender Period, the land plot will be awarded to the Winning Developer.
See : First EC site in Tengah awarded for $400.32 million in new record, Straits Times, Jun 2021
The first executive condominium (EC) site in the "forest town" Tengah has been awarded to Taurus Properties SG for $400,318,000, the Housing Board announced on Thursday (June 3).
This translates to $603 per square foot per plot ratio (psf ppr) for the 99-year leasehold site - a record land rate for an EC site under the government land sales (GLS) programme.
Following that, there is a mandatory 15-month wait period (or if the Developer can complete Foundation Works) before the project can be launched for Public Sales.
This 15-month waiting period, was implemented as a measure to delay new sales of EC units, intended to encourage developers to bid more prudently for EC sites.
See : 15-month waiting time for EC launches stays: MND, Straits Times, Jan 2016
The waiting period, introduced in January last year, stipulates that developers can put an EC up for sale 15 months after buying the land or completing foundation works, whichever is earlier.
Once the wait period is up, the Developer will prepare for the Launch of the Preview, and will typically publish a Press Release stating the commencement of the Preview, and also starting prices per unit category. The full price list is NOT MADE AVAILABLE at this juncture.
Once the Preview has started, interested buyers can head over to the showflat and view the site model and showflats, and if they are keen on making a purchase, they can submit an eApplication Form that will capture their details, including whether they are first or second timers, so that they can take part in the Launch Day Ballot.
Free Download : Download EC eApp form
Buyers will make their booking on Booking Day, and during the first month of a New EC Launch, there is a 70% Quota on First Timers, and 30% Quota on Second Timers.
After the first month, the quota will be opened up for Second Timers as well, and typically there will be a separate Ballot conducted just for interested Second Timers.
The following diagram provides a summary of this launch process, using Copen Grand EC as an actual example to illustrate how the timeline works in practice.
See the corresponding press releases here:
For buyers of a New EC, they can choose, at the point of booking, whether they would like to purchase under the NPS (Normal Progressive Scheme) or the DPS (Deferred Payment Scheme).
The differences between these 2 payment schemes is :
Do note that it is not possible to change payment schemes once decided, as the OTP, Sales & Purchase Agreement and also Stamp Duties are all issued with respect to the purchase price.
For residential property purchases, whether for New Launch EC, New Launch Condo, Resale EC/Condo, the following Financing Structure applies.
First, the Loan-To-Value (LTV) Ratio, meaning the maximum loan support, is capped off at 75% of the purchase price.
See : Rules for New Housing Loans, MAS, July 2018
At the same time, there is a minimum 5% Cash payment required.
The remaining 20% can be paid for in a mixture of Cash and CPF.
For CPF, only funds in the CPF OA (Ordinary Account) can be used for payment for the property price, Buyer's Stamp Duty and Legal Fees.
It is crucial to note that the sequence of financing must be Cash, followed by CPF, followed by Loan.
The fundamental aspect of calculating the financing of a New EC Purchase lies with the amount of loan that the purchasers can take, as any shortfall from the loan will require buyers to top up in Cash and CPF.
If you'd like to calculate your EC (and also Condo) Loan, here's an Excel Calculator that you may find useful:
Free Download : Download EC Loan Excel Calculator!
NORMAL PROGRESSIVE SCHEME
Let's take a look at an example of buyers who are eligible for a loan amount that is 75% of the purchase price of their unit.
Keeping in mind that the financing sequence is Cash, CPF, Loan,
NORMAL PROGRESSIVE SCHEME
Now we examine how the financing structure works when the buyers do not have sufficient loan for 75% of the purchase price, at the same time, we assume that their CPF on hand is sufficient only for 15% of the purchase price.
The most crucial aspect of the structure to understand is that the Cash-CPF-Loan sequence means that the Loan must cover the last stages of payment, in other words, when calculating your financing structure, it must go from a bottom-up approach:
In the following diagram, this means that for the buyers,
DEFERRED PAYMENT SCHEME
Now we take a look at the Deferred Payment Scheme, which works by allowing buyers to defer the bulk of their payment for the unit until the project has reached TOP.
In our first scenario, we examine the simpler case, where buyers do not require the use of a Bridging Loan.
Again, keeping in mind the Cash-CPF-Loan sequence, here we assume that they have sufficient cash funds to make payment for the first 20%.
The subsequent payment tranches, which is called upon TOP, will then be paid for using CPF and Mortgage Loan.
DEFERRED PAYMENT SCHEME
Now we take a look at the scenario which is more likely to be applicable for most Second Timers buyers, or Buyers with an existing HDB, as:
In this case,
