Developers can no longer re-issue OTPs to the same buyer(s) for the same unit(s) within 12 months of the earlier OTP.
Starting from Monday (28 September), housing developers can no longer re-issue Option to Purchase (OTP) for the same unit to the same buyer(s), according to a release by the Urban Redevelopment Authority (URA).
This comes after the Controller of Housing imposed new conditions in the sale licences of housing developers.
Specifically, developers are restricted from providing upfront agreement to buyer(s) to re-issue OTP; and from re-issuing OTP to the same buyer(s) for the same unit within 12 months following the expiry of the earlier OTP. Developers are also mandated to “inform purchaser(s) of this condition upfront”.
Under a standard OTP, intending purchasers have three weeks within which to exercise the option. Failure to exercise the OTP within the said period will lead to the forfeiture of the buyer’s 25% booking fee.
The Urban Redevelopment Authority (URA) explained that the three-week validity period is put in place to encourage homebuyers to exercise financial prudence and commit to acquiring a property only when they have the financial means to do so.
However, it noted that there have been instances “where the OTP is re-issued multiple times to the same purchaser(s) for the same unit” – significantly lengthening the option period. Hence, the move to restrict the re-issue of OTP.
“The need for greater financial discipline in making property purchase decisions is especially pertinent given the current economic situation, where workers are facing uncertainties in the labour market,” said URA.
“Purchasers should only commit to a property purchase when they are ready to exercise the OTP within the validity period.”
While it believes that the current validity period in the standard OTP is sufficient for most buyers to exercise the option, the Controller also recognises that some buyers may need more time to finalise the necessary arrangements prior to exercising the OTP.
Some buyers, for instance, may need more time to complete the sale of their existing property.
With this, the Controller said that homebuyers or the developers can apply for an extension of the period to exercise the OTP.
“The Controller is prepared to extend the validity period of the OTP up to 12 weeks from the OTP date, provided that both parties (i.e. the purchaser and the developer) are agreeable,” read the circular. Buyers who want to extend the OTP’s validity period will need to write in to email@example.com, with the following details:
- a copy of the OTP;
- expiry date of the OTP; and
- reasons for requiring more time to exercise the OTP
Meanwhile, Lee Sze Teck, Director of Research at Huttons Asia, believes the new circular will have more impact on HDB upgraders.
“The sale of an HDB flat will take more than the three weeks given under the terms of the OTP. So HDB upgraders will try to sell off their existing HDB flat so that they do not have to stump up the Additional Buyer’s Stamp Duty (ABSD) upfront. Effectively now, HDB upgraders has to come up with almost 40% cash and CPF within three weeks if they want to buy a private residential unit,” he said.
The new circular may also have an impact on the HDB rental and resale market given that HDB upgraders usually rent another HDB flat while waiting for the completion of their new unit.
And while no one is legally allowed to own both an HDB and executive condominium (EC) unit at the same time, there is no requirement to pay ABSD for an EC unit.
As such, there “may be spillover demand to the EC market following this announcement”, said Lee.
Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email firstname.lastname@example.org