The Urban Redevelopment Authority (URA) will stop issuing Option-to-Purchase or OTP to the same buyer/s for the same unit starting September 28 according to a press release.
The statement came after new conditions were imposed by the Controller of Housing on housing developers’ sale licenses.
The new condition specifically restricts the developers from providing an upfront agreement to re-issue OTP to buyers. The same goes for the same buyer/s of the same unit OTP re-issuance within a 12-month period after the expiration of the earlier OTP. Mandated by the new conditions, developers should “inform the purchaser/s of this condition upfront”.
The intended purchaser, based on the standard OTP, can apply the option within the validity of a three-week period. Failure to comply within the time frame will forfeit the 25% buyer’s booking fee.
In this 3-week period of validity, homebuyers are encouraged to exhibit financial diligence and be committed to obtaining a property only when they are financially able.
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However, there are instances that the same buyer has been re-issued multiple times with OTP for the very same unit, which notably extends the option period. This results in the restriction of OTP re-issuance.
The URA mentioned that in purchasing a property, financial discipline should be considered, especially in today’s situation where the current economy is greatly affected by the pandemic. Workers are having uncertainties facing the labor market.
Another thing is that buyers should only be committed to buying a property once they are ready to use OTP with the stated validity period.
Though it is firmly believed that the standard OTP’s validity period is satisfactory for most homebuyers to apply the option, prior to applying the OTP, purchasers may need additional time before they can finalize the required arrangements which are also recognized by the Controller.
In some instances, buyers may require more time to complete and finalize the deal for their current property.
For this reason, developers or home buyers can apply for an OTP extension.
Based on the circular, the OTP can be extended by the controller for up to twelve weeks from its original date, in the condition that both parties (developer and buyer) agree. If a buyer needs to extend the validity period of their OTP should send their letter to ura[email protected] and must include the following details:
- An OTP copy
- Date of OTP, and
- Justification as to why they will need an extension for their OTP
Huttons Asia’s Director of Research Lee Sze Teck firmly believes that HDB upgraders will receive more impact with the new circular.
The director mentioned that it will take longer than 3 weeks for an HDB flat sale with the new conditions on OTP. For HDB upgraders to avoid paying upfront the Additional Buyer’s Stamp Duty or ABSD, they will try selling their existing flat. Director Tech also mentioned that if HDB upgraders want to acquire a private residential unit, they have to come up with CPF and cash of about 40% in a span of 3 weeks.
The resale and rental market of HDB might also be impacted by this new circular as upgraders normally take another HDB rental albeit waiting for their new finished unit.
Even if no one is allowed legally to own both executive condominium and HDB units at the same time, ABSD payment is not required for EC units.
Lee added that there might be spillover demands for executive condominiums subsequent to the announcement.
READ MORE: ABSD Deferment for HDB upgraders?