Developers have decided to reduce or scrap the indirect discounts they are offering to home buyers, like free renovation or furniture vouchers, as these promos were not effective in attracting new clients since the property curbs were implemented.
“It used to be quite common to give these discounts and we called it all sorts of things, like interior design voucher,” said Chris International Director Chris Koh.
“That has more or less stopped since the tightening of the loans requirements, and we have to be very transparent in giving such discounts now.”
Notably, home buyers are required to inform banks about all discounts they received when applying for a housing loan. These discounts are subsequently deducted from the property price, resulting in a lower loan quantum for the buyer, experts noted.
Although this rule has been in effect since 2002, financial institutions have been stricter in implementing it over the past few years, given the stringent guidelines on housing loans.
“Before that, banks could interpret the rules themselves, but now that they have to net off all discounts and benefits, it does not work for the buyer,” noted Eugene Lim, ERA Realty’s Key Executive Officer.
Furthermore, buyers have become wiser. Instead of indirect discounts, they now prefer a lower property price, added PropNex Realty CEO Mohamed Ismail.
“Real buyers are more discerning and they don’t fall for these gimmicks anymore. They know if you can offer vouchers, you must have marked up the price elsewhere so they would rather go for a discount on the home than incentive packages,” he explained.