Ravi Chandran
When you’re buying BUC unit, you buy a property which is still under construction.
Buying a new launch condominium is undoubtedly an exciting step forward in fulfilling your home goals. What makes it even better, though, is that you can pay for the property progressively, in stages, instead of at one go.
As developers try to avoid penalty of ABSD and Qualifying Certificate, they start marketing the property they are building years before Temporary Occupation Permit (TOP) is issued.
But buying BUC unit is different from buying a completed residential property.
How is it different? It is different in the following ways:
- The home loan is disbursed differently for BUC loans and for completed properties
- You usually get better discounts when buying BUC unit
- You are basically buying without knowing what the finished product will look like
- You will have to wait a very long time
1. The home loan is disbursed differently if you’re buying BUC unit
Unlike a loan for a completed property which is 100% disbursed at one time, BUC loans have a progressive disbursement schedule. In other words, a certain percentage of the loan is disbursed at each stage of the property construction. The following example illustrates this.
Example 1
Purchase Price: S$2,000,000
Loan Quantum: S$1,600,000
Table 1: Disbursement Schedule for BUC Loans
| Stage | Month | Disbursed Ratio | Interest Rate | Disbursed Balance | Monthly Installment |
| Completion of Foundation | 1 | 10% | 1.250% | S$200,000.00 | S$666.50 |
| Completion of Superstructure | 7 | 10% | 1.250% | S$397,243.81 | S$1,342.32 |
| Completion of Brick Wall | 13 | 5% | 1.450% | S$491,658.14 | S$1,731.45 |
| Completion of Ceiling/Roofing | 17 | 5% | 1.450% | S$587,100.42 | S$2,086.91 |
| Completion of ElectricalWiring/Plumbing | 21 | 5% | 1.450% | S$681,580.43 | S$2,445.75 |
| Completion of Roads/CarsParks/Drainage | 25 | 5% | 1.450% | S$775,079.97 | S$2,808.04 |
| Issuance of Temporary OccupationPermit (TOP) | 29 | 25% | 1.450% | S$1,267,580.46 | S$4,637.19 |
| Certificate of Statutory Completion | 40 | 15% | 2.750% | S$1,534,842.41 | S$6,759.05 |
Source: www.iCompareLoan.com
Repayment of the loan commences at the first disbursement. That is in the first month. Disbursed Ratio is the percentage of the purchase price, not the loan quantum. In the first month 10% is disbursed and in the seventh month, another 10% is disbursed, and so on.
Do note that this schedule is only a guide, the actual completion time for each stage may vary in reality, but the amount payable at each stage should be the same.
If you still need clarification on the payment schedule of a BUC loan, you can turn to a professional mortgage consultant who dispenses free advice and reports generated from Singapore’s most advanced loan analysis system.
2. You usually get better BUC loan discounts than for completed properties
While properties that are still under construction may have more risks than a completed property, developers often incentivize buyers with per-square-foot discounts, absorption of stamp duties, or other administrative costs. Besides the monetary savings arising from an early purchase, you may be able to benefit from a lower interest rate as well—BUC loan rates are not necessarily higher when compared with loans for completed properties.
Besides the possibility of conversion when the property receives its TOP, note that there are loan packages that are not valid for buildings under construction.
| Bank | State Bank of India | Maybank | Standard Chartered Bank | Hong Leong Finance | OCBC |
| Lock-in | 3 | 0 | 0 | 2 | 0 |
| Year 1 | 0.960% (1M SORA + 0.780%) | 1.055% (3M SORA + 0.900%) | 1.085% (3M SORA+ 0.930%) | 1.200% (Fixed) | 1.300% (Board) |
| Year 2 | 0.960% (1M SORA + 0.780%) | 1.055% (3M SORA + 0.900%) | 1.085% (3M SORA + 0.930%) | 1.200% (Fixed) | 1.300% (Board) |
| Year 3 | 0.960% (1M SORA + 0.780%) | 1.555% (3M SORA + 1.400%) | 1.085% (3M SORA + 0.930%) | 1.400% (Board) | 1.300% (Board) |
| Year 4 | 1.380% (1M SORA + 1.200%) | 1.555% (3M SORA + 1.400%) | 1.085% (3M SORA + 0.930%) | 2.100% (Board) | 1.600% (Board) |
| Year 5 | 1.380% (1M SORA + 1.200%) | 1.555% (3M SORA + 1.400%) | 1.085% (3M SORA + 0.930%) | 2.100% (Board) | 1.800% (Board) |
| Thereafter | 1.380% (1M SORA + 1.200%) | 1.555% (3M SORA + 1.400%) | 1.085% (3M SORA + 0.930%) | 2.100% (Board) | 1.800% (Board) |
| Legal subsidy | >$250K – 0.40% capped $1,000 >$750K – 0.40% capped $1,250 >$2M – 0.40% capped $1,500 | 0.40% of loan amount capped at $2,000 (Cash rebate) | $400K – $1,600 | – | > $500K = $2,000 > $1.5M = $2,500 |
| Minimum loan | $250,000 | $300,000 | $500,000 | $100,000 | $300,000 |
| Remarks | Full valuation subsidy Free 1 year fire insurance 1M SORA: 0.1944% (as of November 2021, first business day) | 1 time free conversion No valuation report required. 3M SORA: 0.1546% (as of November 2021, first business day) | 1 X free conversion after 1st disbursement MortgageOne interest offset feature Min. loan for SCB Priority Client: $300K 3M SORA: 0.1546% (as of November 2021, first business day) | 1 x free conversion within 6 months from TOP 1st drawdown must be within 9 months Interest commencement from 1st drawdown | 2 x free conversion (1 upon disbursement, 1 upon T.O.P) Waiver of cancellation fee due to sale |
Usually interested home buyers will attend showflat viewings at “soft launches” by developers and make a booking to secure the best higher floor units with the most ideal layouts and optimal views. Buyers are also attracted by the ‘Early bird” discounts and perks such as per-square-foot discounts or the waiver of stamp duties or any other administrative costs. When you are buying a BUC property, you will need a mortgage loan.
However, beware of a trick where developers price the property 20 per cent above value, and then “discount” it by 20 per cent. Check the value of surrounding units, to make sure you’re really getting a good deal.
3. Buying without knowing what the finished residential property will look like
Buying BUC unit and getting your home loan is only the first part of your home ownership tasks. You must always remember that you are buying without knowing what the finished product looks like The ‘early bird discounts’ and the other perks are the benefits for this risk that you are taking.
So, you should read up on what happens when home owners collect their keys to their condominiums when it achieves Temporary Occupation Permit (TOP) status. There has been many stories of home buyers being unhappy with the completed property because of the many defects in it.
So, always do your homework. Find out who the developer is. Check what is their track record, and take a calculated risk. Don’t go in blind. Home owners will conduct new condominium defect inspection before the start of any renovation work. But what do you look for in defect inspection. Buyers should read up and equip themselves on this very important topic as well.
4. Waiting for a very long time for the BUC unit to be completed
If you’re buying BUC unit, you must already have a proper place to stay. This is because a BUC takes about 3 years for completion. The Covid-19 pandemic has placed further constrains on labour, which means that there could be further delays. So, you should always have a contingency plan. And while you are waiting, there is no ‘rental income’.
So, buying BUC unit, either to stay in or as an investment is an individual choice. It is a decision which must be made after considering all factors. It pays to cross all the ‘t’s and dot all the ‘i’s. You may after all, pay more than a million dollars for your private residential property.
