In Singapore’s property market, OTP stands for Option to Purchase, a legal agreement between a buyer and a seller (or developer) for the sale of a residential property. By signing the OTP, the buyer pays an option fee to reserve the property. If the buyer decides not to proceed with the purchase before the option expires, the option fee is forfeited.
Update for 2025: The Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) rules remain applicable to both residential and non-residential properties, with medium-term interest rate floors taken into account when assessing loan eligibility.
For any OTP granted or Sale and Purchase Agreement (SPA) signed in 2025, these measures remain relevant for calculating the maximum loan amount a buyer can obtain.
What is an Option to Purchase (OTP)?
If you’re wondering what is OTP in real estate, it refers to a legally binding agreement between a buyer and a seller (or developer) that grants the buyer the exclusive right to purchase a property at an agreed-upon price within a specified timeframe.
To secure this right, the buyer pays an option fee, which serves as a reservation for the property during the option period.
When the buyer decides to proceed with the purchase, they exercise OTP by signing the Sale and Purchase Agreement (SPA) and paying the remaining down payment. If the buyer does not exercise the OTP by the expiry date, the option fee will be forfeited.
What’s the Difference Between HDB and Private Property OTPs?
When buying property in Singapore, the Option to Purchase (OTP) differs between HDB flats and private properties. Understanding these differences helps you navigate the purchase process smoothly and avoid costly mistakes.
Eligibility
Only eligible buyers who meet HDB’s criteria can obtain an OTP.
Open to any eligible buyer (Singaporean, PR, or foreigner, depending on property type).
Option Fee
Fixed at $1,000, payable to the flat seller.
Typically, 1% of the purchase price, payable to the developer or seller.
Option Period
Valid for 21 calendar days from the date of issue.
Usually valid for 14 days, although this period can vary depending on the specific agreement.
Exercising the OTP
Buyer signs the resale application and pays the remaining deposit of up to $5,000 (including the option fee).
Buyer signs the Sale and Purchase Agreement (SPA) and pays the remaining 4% of the purchase price to form the standard 5% down payment.
Governing Authority
Regulated by the Housing & Development Board (HDB).
Governed by the Council for Estate Agencies (CEA) and standard private property laws.
Cancellation
If not exercised, the seller keeps the $1,000 option fee.
If not exercised, the seller retains the 1% option fee.
Loan Assessment
Subject to HDB Loan or Bank Loan rules and the Mortgage Servicing Ratio (MSR).
Subject to Bank Loan rules and the Total Debt Servicing Ratio (TDSR).
Stamp Duty
Payable upon exercising the OTP through the HDB resale portal.
Payable upon signing the SPA via IRAS within 14 days.
What’s Within an OTP Agreement?
An Option to Purchase (OTP) agreement outlines the essential details of a property sale, including the parties involved, the property, the purchase price, and key terms such as the option period and associated fees.
It also outlines the rights and responsibilities of both the buyer and seller, ensuring clarity and legal protection throughout the transaction. The OTP agreement should typically cover these basic elements:
- Parties’ Details
The OTP must clearly state the details of the parties involved, the buyer and seller. Accurate identification is crucial, as it can affect the validity of the transaction. For instance, only the legal owner of a property can issue an OTP. If the seller’s details do not match the registered legal owner, the OTP may be considered invalid. Key information to include:
- Full names of buyer and seller
- Identification numbers (NRIC/FIN for individuals, UEN for companies)
- Contact information
- Current registered addresses
- Property Details
The OTP should specify the property being sold, including its characteristics, to ensure clarity and avoid disputes. Important property details include:
- Full property address
- Site or floor area
- Whether the property is sold with vacant possession (ready for occupancy) or subject to tenancy
- Any warranties on additions or alterations
- Purchase Price
The OTP must state the agreed purchase price at which the seller is selling the property to the buyer.
- Option Period
The option period defines the time frame during which the buyer has to decide whether to purchase the property.
- HDB flats: Fixed at 21 calendar days, expiring at 4 pm on the last day. For example, an OTP granted on June 1 will expire at 4 pm on June 22.
- Private properties: Typically set at 14 days, though this can be negotiated if both parties agree.
The option period is significant because if the buyer does not proceed before expiry, the seller keeps the option fee.
- Option Fee
The option fee is the amount the buyer pays to secure the OTP.
- HDB flats: Minimum $1, maximum $1,000
- Private properties: Usually 1% of the purchase price, though negotiable. A higher fee may be requested for a more extended option period to offset the seller’s risk.
- Option Exercise Fee
The option exercise fee is paid when the buyer decides to exercise the OTP.
- HDB flats: The sum of the option fee and exercise fee (the deposit) must not exceed $5,000. Example: If the option fee is $1,000, the exercise fee cannot exceed $4,000.
- Private properties: Typically 4% of the purchase price, but negotiable depending on the agreement.
- Parties’ Rights and Responsibilities
The OTP usually incorporates the Law Society of Singapore’s Conditions of Sale, which outline the rights and obligations of both parties. Key conditions include:
Condition 6 – Outgoings, Rents, and Profits until Completion:
The buyer is entitled to rents and profits but liable for expenses after completion. The seller is entitled to rents and profits but responsible for expenses up to completion.Condition 7 – Tax:
The buyer pays property tax and GST, while both parties pay their respective stamp duties and withholding tax as applicable.Condition 9 – Late Completion Interest:
Either party must pay interest if completion is delayed due to their fault.Condition 15 – Notice to Complete:
If the sale is not completed by the completion date, either party may issue a written Notice to Complete, requiring completion within 21 days.
- What Happens if the OTP Is Not Exercised Before It Expires
If the buyer does not exercise the OTP within the option period, the agreement lapses and the option fee is forfeited to the seller.
- Whether the Property Is Furnished or Vacant
The OTP should state if the property is being sold furnished or vacant. If furnishings are included, an inventory list should be attached to avoid disputes.
- Obligations of the Buyer and Seller
The OTP outlines the rights and responsibilities of both parties, such as payment schedules, completion timelines, taxes, and maintenance or disclosure obligations, ensuring a smooth and legally protected transaction.
What Is the Process for a Private Property OTP Agreement?
The process for a Private Property OTP Agreement outlines the key steps a buyer and seller must follow to secure and finalise the property sale. Understanding each stage helps ensure a smooth and legally protected transaction.
- Negotiation and Agreement: The buyer and seller agree on the property price and terms.
- Preparation of OTP: The seller (or developer) issues the Option to Purchase agreement, usually through a lawyer.
- Payment of Option Fee: The buyer pays the option fee (typically 1% of the purchase price) to secure the property.
- Option Period: The buyer has the agreed period (commonly 14 days) to decide whether to proceed.
- Exercising the OTP: If the buyer chooses to purchase, they exercise the OTP by signing the Sale and Purchase Agreement (SPA) and paying the remaining deposit (typically 4%).
- Completion: The transaction proceeds in accordance with the SPA, including loan arrangements, stamp duty payment, and property handover.
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What Is the Process for an HDB OTP Agreement?
The process for an HDB OTP Agreement guides buyers and sellers through the legal steps required to complete an HDB resale transaction. It ensures both parties understand their obligations, the option period, and the procedure for exercising the OTP.
- Eligibility Check: Ensure the buyer meets HDB eligibility criteria for resale or new flats.
- Negotiation of Price: Buyer and seller agree on the resale price.
- Issuance of OTP: The seller issues the HDB Option to Purchase.
- Payment of Option Fee: Buyer pays the option fee (up to $1,000).
- Option Period: The buyer has 21 calendar days to decide whether to proceed.
- Exercise of OTP: The buyer submits the resale application and pays the remaining deposit (part of the $5,000 maximum).
- HDB Approval and Completion: HDB reviews the resale application, approves the sale, and arranges completion and key handover.
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What Happens When the Buyer Chooses to Exercise the OTP?
When the buyer decides to proceed with the purchase, they exercise the Option to Purchase (OTP). This action formally confirms their intent to buy the property. It triggers the next steps in the transaction, including signing the Sale and Purchase Agreement (SPA) and paying the remaining deposit.
Exercising an HDB OTP
For HDB flats, the buyer exercises the OTP by submitting a resale application to HDB and paying the remaining deposit, ensuring the total deposit does not exceed $5,000. Once the OTP is verified, HDB reviews the application, and upon approval, the sale proceeds toward completion with the key handover and transfer of ownership.
Exercising a Private Property OTP
For private properties, the buyer exercises the OTP by signing the Sale and Purchase Agreement (SPA) and paying the remaining deposit (usually 4% of the purchase price). Following this, the sale proceeds according to the SPA’s terms, including loan arrangements, stamp duty payment, and completion or handover of the property.
What Happens After the Buyer Exercises the OTP?
Once the buyer exercises the OTP, the sale becomes binding and the Sale and Purchase Agreement (SPA) comes into effect. From this point, both buyer and seller must follow the terms of the SPA, including arranging financing, paying the remaining deposit, completing stamp duty obligations, and preparing for property handover.
For HDB flats, HDB will review and approve the resale application before completion, while private property transactions proceed according to the SPA timeline and legal requirements.
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Important Note for Private Property OTPs: Re-Issuing is No Longer Allowed
While sellers have the right to forfeit the option fee and re-list a property when buyers do not exercise their OTP by expiry, some developers previously offered buyers the ability to cancel the OTP.
They also allowed the re-issuance of the OTP, effectively extending the buying window. This was often used to allow buyers more time to secure financing or take advantage of early-bird discounts.
However, since 28 September 2020, developers are no longer allowed to exploit this loophole. The updated rules require developers to:
- Stop offering upfront agreements to re-issue OTPs.
- Prevent re-issuing the OTP to the same buyer for the same unit within 12 months after the original OTP expires.
- Inform buyers upfront about these restrictions.
This means that buyers must exercise their OTP within the designated option period (typically three weeks). If they do not, the developer cannot re-issue the OTP, and the buyer must wait 12 months before purchasing the same unit.
If more time is genuinely needed, buyers can formally apply for an extension by emailing URA. The OTP period can be extended by up to 12 weeks from the original date, provided both the buyer and developer agree. Note that backdating an OTP is illegal.
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