Monday, September 14, 2009

New Regulation for New Launches

With immediate effect from 14 September 2009, developers are no longer allowed to offer IAS (interest adsorption scheme) for the purchasers of private residential properties.

However, the developers that have already entered into agreement with banks to offer IAS or have already offered IAS, before 14 September 2009, will be allowed to do so. This new regulation applies to all developers intending to launch their developments after 14 September 2009.

As I see it, the new regulation, on the Government's part, is to reduce speculation and create a more stable private property market. On the part as the purchasers, the impact is that if you are intending to purchase new launch, you will soon be not able to utilize the IAS scheme; you will have to pay progressive payment during the construction phase.

If you are intending to purchase new launches with the IAS scheme, it may be prudent to start searching for suitable property now. I can help you with this.

If you are not intending to purchase new launches, I foresee that this new regulation will dampen the new launch market. In fact, I feel this regulation will prop up the resale market since investors are not able to utilise the IAS scheme to escape paying the interest during construction. As such, since interest has to be paid on the new launch market or on resale market, logically, investors will prefer TOP development which they can rent for immediate rental income. If you already own a private property, congratulations! I expect the resale market to be hotter than the new launch market. If you have the financial girth to hold off selling for the moment, I would advise you to do so; you should wait to see the impact of this regulation on the resale market in a few month's time. If you have not bought or waiting around, I would sincerely advise you to start searching - for either new launch with IAS scheme, or a TOP development.

Do email me if you are have doubts about this new regulation or if you require assistance in searching for the right property in light of this regulation. I have the regulation details in PDF format (many thanks to from Jeremiah Cai of Standard Chartered Bank for it). Do email me for it.


Richard Wan
Huttons Asia

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