MND tweaks rules for exec condo purchases

PHOTO: MND tweaks rules for exec condo purchases

New rules governing the purchase of executive condominiums (EC) were announced last night that could help home buyers, along with a tighter curb on loans.

The three main changes announced by the Ministry of National Development (MND) are aimed at bringing the terms for ECs more in line with the rules applying to public housing, and to support a stable EC market.

One measure, similar to that for Housing Board purchases, makes it less financially onerous for a couple if they back out of a sales and purchase agreement.

But buyers will have tighter loan curbs placed on them.

Also, second-timer applicants who buy EC units directly from developers will have to pay a resale levy. The new requirement applies to EC land sales launched on or after Dec 9.

The reforms stem from a review by the MND that included public feedback.

The tighter loan measures will require repayments for a mortgage for an EC unit to be capped at 30 per cent of the buyer's gross monthly income.

Previously, EC buyers were limited by the total debt servicing ratio, which caps a borrower's monthly repayments on all loans, including any new mortgage, at 60 per cent of his gross monthly income.

The change follows similar measures introduced by the HDB and the Monetary Authority of Singapore to encourage financial prudence among buyers of public housing. MND said that the move "discourages EC buyers from over-stretching their finances and supports an affordable and sustainable EC market".

The cap applies to purchases where the option to purchase is granted on or after Dec 10.

R'ST Research director Ong Kah Seng said that buyers will now have to think twice about buying pricey EC units.

"Developers have raised prices according to the improved EC demand, and this measure will ensure that buyers purchase ECs in accordance with their earning capacity," he said.

But there is good news as well. Rules penalising EC buyers who back out of sales and purchase agreements have been eased.

The cancellation fee has been cut from 20 per cent of the purchase price to 5 per cent - the same figure that applies to HDB flats.

The new fee applies to EC land sales launched on or after Dec 9.

The ministry said the change reflects the fact that unlike buyers of private housing, EC buyers cannot sub-sell their units if they realise they cannot complete the purchase. Having to pay a 20 per cent cancellation fee was seen as particularly onerous for young couples.

Century21 chief executive Ku Swee Yong noted that developers that bought EC sites in the past few months might have to keep units at upcoming launches small, so that the total selling price is kept affordable.

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