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Singapore’s Real Estate segment is considered performing well despite the pandemic that we are going through now. However, some new launch condo sale figures are affected by some undesirable practices. Urban Redevelopment Authority (URA) is stepping up its effort to monitor the misuse of these practices which does not reflect the actual sale figures.
These undesirable practices normally involve in reissuing the option to purchase (OTP) after the OTP lapse by the developers. This arrangement can range from 6 months to 18 months depending on the agreement between homebuyers and developers. The benefit of this arrangement will empower the ability for certain home buyers by giving them extra time to sell their current property so that they can utilize the financial resources from current property to purchase their dream home. Although this arrangement assists genuine home buyers, there is also a possibility that they will abort the deal due to income instability especially during the current pandemic situation. Another major concern from this kind of arrangement is that it also presents an opportunity for some property investors to game the system without actual intention to complete the deal. They will just lapse the OTP and such intentions will affect the actual sale figure and might lead to a breach in loan covenants. Given these undesirable outcomes from these practices, URA has stepped up their engagement with developers to advise them on the practice of granting OTP only when home buyers are ready to exercise before the OTP lapse.
URA officials will be examined developer OTPs’ logbooks from the past one year to collect relevant data on deals that are aborted by home buyers or property investors. They will be able to identify genuine and fake intents on the purchase of the unit from this information. URA officials may also question developers on the rationale of multiple reissuing of OTP and advised the developers not to pressure home buyers to complete the transactions. It is ethical and correct to follow the proper procedures by the developers and homebuyers to reflect the actual sale figures and the sentiments of the market.
URA has been monitoring the practices and warnings had also been issued to developers with multiple reissuing habits. However, they are stricter in the monitoring process now and developers are taking it seriously in fear of suspension of their sale license if they continue to ignore the warning from URA.
Reissuing of OTPs for a reasonable period certainly benefit genuine home buyers to allow them to strengthen their financial standings before proceeding with the deals. However, multiple reissuing of OTPs will have a higher risk of aborted cases which is not healthy for the overall real estate market. With proper measures from URA to monitor the sale and purchase procedures, all stakeholders like developers, real estate agents, buyers, and sellers will benefit from a more holistic and proper environment.
Updates : URA has issued a circular regarding the restriction on the re-issue of OTP.