What is Deferred Payment Scheme (DPS)?

The Deferred Payment Scheme or DPS,in its current form, is a payment scheme offered by property developers to move unsold units in projects that have attained Certificate of Statutory Completion (CSC). It is a private treaty between the developer and the buyer that allows the buyer to put down only 20-30% upfront and take possession of the unit. The balance is only due 2-3 years later. Meanwhile the buyer can rent out or move into the condominium without securing any mortgage loans.

What is the history of DPS?

In Oct 1997, the Singapore Government allowed property developers to offer to buyers 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 even allowed developers to delay up to half of the initial 20% downpayment up to the issue of TOP of the project. This means that buyers can simply pay down 10% until they get the keys to the property at TOP time. DPS was introduced to stimulate the property market. It was withdrawn in October 2007, when the market hit a peak.

 The current DPS is not the same as the old DPS which has been withdrawn indefinitely.

Why does the government allow DPS?

DPS was withdrawn for uncompleted projects but the rules does not affect completed projects. This means any completed properties which obtained Certificate of Statutory Completion (CSC) are not affected by the rules.

 Why do the developers offer DPS?

 Today, DPS is being used by Developers to sell unsold units of completed projects. They are subsidising the interest of buyers such as to avoid the QC/ ABCD penalty for unsold units whereby all developers with non-Singaporean directors or stockholders must obtain Temporary Occupation Permits (TOP) for their private housing projects within five years, and sell all units within two years thereafter. To extend the sales deadline, developers must pay the government an additional eight percent, 16 percent and 24 percent of the land purchase price for the first, second and subsequent years, respectively. The amount is pro-rated based on the proportion of unsold units.

How do I qualify for DPS?

As long as you have the cash for the downpayment, you put down the cash and the developer will issue the Option to Purchase to you. 

Why should we take advantage of DPS?

How often does a seller subsidize you to purchase their products? Not only are the sellers of good repute, the products offered are physically available and you can inspect them and be satisfied that they are of good quality. On top of that, you can start making money from the products by renting them out and you do not need pay any royalties to anyone. Has there been a better deal?

What are the risks of taking on DPS?

Since DPS is a private treaty between the property developer and the buyer, the risk is really between the 2 parties. Will the developer stay solvent and if not, what can happen to the property that the buyer bought through DPS? And for the developer, what if the buyer is not able to exercise the option or pay up the balance at the end of 24 or 36 months?  

Will DPS be offered when the market recovers?

Most probably not. There will be no incentive for the property developers to do so. When the market is moving again, you will see the showflats filling up and units flying off the shelves as fast as the developers can launch them. We witnessed this in 1996 and we saw it repeated in 2007. When Marina Bay Residence was launched in Dec 2006, when the market is really hot, buyers queued up and snapped up all 428 units within 1 day.

 

Still not sure? Read 10 things you never knew about Deferred Payment Scheme.