A TOP project is one of the many types of properties buyers can consider investing in.
The sheer variety of property types in Singapore can be confusing for buyers.
Not only must a prospective buyer determine whether a property is public or private, freehold or leasehold and landed, strata title or non-strata title, he must also consider what stage of completion the property is at.
TOP projects are properties whose temporary occupation permit (TOP) has been issued, but which have not yet been fully completed.
When the TOP is issued, the property is officially ready for occupation. This means that buyers of TOP projects can move in or start renting out their property any time they wish.
What exactly is a TOP project?
When a development is under construction, the Building and Construction Authority (BCA) vets the property at various stages to determine which stage of construction it is at and, eventually, whether it is fit for occupation.
The TOP is issued when, upon completing an inspection, the BCA is satisfied that the property or part thereof can be safely occupied.
Buyers of new developments typically commit to the purchase years before the property is ready for occupation. They usually pay for the property in stages, according to which stage of construction has been completed.
It is only after the release of the TOP that buyers are notified that they may collect their keys, inspect the unit and move in.
That means their units are ready for habitation and can now be furnished and modified within the limits allowed by the building’s administration.
However, that does not mean the building is officially completed. As is often the case, certain common areas may not be accessible at the TOP stage.
It often takes a few years before the building is declared completed by the BCA, who will then issue a Certificate of Statutory Completion (CSC).
What sets TOP projects apart?
TOP projects lie in between under-construction developments and resale property on the completion timeline.
One of the most distinct advantages of TOP projects it that they enable buyers to move into a new property without having to wait years for it to be built.
Being able to move in at the time of purchase also enables investors to rent the property out immediately, and use the rent to offset the cost of their mortgage repayments.
Conversely, buyers who commit to the purchase at the time the development is first launched must wait years before they can see any return on investment.
That is because construction is unlikely to have started only after the time of the launch. It usually takes several years before construction has reached the point where the TOP can be issued.
A purchaser of a TOP property is also likely to be the first person to take possession of that unit, even if they happen to have bought it from a previous buyer. That means they are free from the concerns about fixing up ageing properties which plague buyers of resale homes.
Are TOP projects affordable?
When you buy property at the TOP stage, the payment schedule you are met with is very different from that faced by buyers who book a property at the launch stage.
Buyers at launch stage pay for the property in stages, each progress payment becoming due when a certain stage of construction has been completed.
For instance, they first pay a five to 10 percent booking fee when they wish to be granted an Option to Purchase, followed by 20 percent minus the booking fee as well as stamp duty when they sign the sales and purchase agreement.
After this stage, they will pay 10 to 15 percent of the purchase price each time subsequent progress payments are called for. When the TOP is issued, they will pay 25 percent of the purchase price.
At this point, they will have paid 85 percent of the purchase price in total. The remaining 15 percent will be paid when the property is finally completed.
Conversely, buyers who purchase the property at the TOP stage must be prepared to pay 85 percent of the purchase price and stamp duty upfront. Clearly, this is a much heftier upfront commitment for buyers.
Buyers of TOP projects will need to ensure they are financially sound before committing to a purchase. They face more time pressure than new launch buyers to raise the cash component of their payment. They also have less time to obtain approval for a bank loan.
The price of TOP projects also tends to be higher than that of launch-stage projects, since they can be immediately occupied and are in a better position to enjoy the infrastructure developments, such as road improvements and new MRT stations, which were key selling points at the time of the launch.
Still, there are some financial advantages to purchasing TOP projects. As investors can rent the property out immediately, they can begin to parlay their rental cashflow into the financing of the purchase.
TOP projects also tend to be priced more affordably than resale property, as well as cheaper to maintain in the short-run as the infrastructure is brand new.
The ability to inspect the property before committing to a purchase is also appealing to buyers.
SEE ALSO: Financing your TOP purchase and eligibility matters
Being able to take possession of a TOP property at the point of purchase is an attractive feature that has made TOP projects quite popular amongst homebuyers and investors alike.
For buyers eager to move into a new home, TOP properties are a lot more enticing compared to new launches, for which they must wait for years, and are shrouded in a certain element of uncertainty.
Home buyers are also saved from having to source for other types of accommodation in the interim, which is particularly pertinent to local couples who would otherwise have to live with their parents or pay rent. The allure of rental income is also a great advantage for investors.
The only other alternative for purchasers who wish to take possession immediately is resale property, which can be administratively more onerous, since home inspections must be arranged and renovations are likely to be needed.
Another advantage of TOP projects is that, if there are unsold units remaining, the buyer gets to choose between units on different floors and of different types. This is preferable to resale property, the supply of which is limited to what sellers are offering.
It is also possible to purchase a unit in a TOP project through a sub-sale, which happens when a purchaser buys a unit off another buyer in an uncompleted development. This enables buyers to obtain a unit that has already been sold out.
TOP projects offer buyers more flexibility and choice than both new launch and resale property, thus making them very attractive as home or investment purchases.