“Reside-and-Purchase” program by Property developer Selangor Dredging Bhd (SDB)

1. Under the RAP program, the buyers will place a 5% down payment on the selling price of the property.
2.They will then have to conclude the sales documents and move into the home immediately.
3.SDB said the buyers will then have to settle the loan differential for up to 36 months in zero-interest instalments.
4.They then have to pay off balance via a bank loan at the end of 36 months.

Source: http://www.starproperty.my/index.php/articles/investment/selangor-dredging-launches-reside-and-purchase-housing-plan/

Let’s casually discuss the topic here. And feel free to contribute any thoughts.

So this is our understanding.
* SDB is selling completed and ready to move in property.

For example,
Sale And Purchase ( SPA) Price: RM1,000,000
Downpayment To Developer, 5% : RM50,000
After paying 5%, a buyer has to conclude Sale and Purchase Agreement & move in immediately.
Balance 95%: RM950,000 ( To be settled by buyer within 36 months with Zero Interest)

1. If the purchaser is a cash buyer, then this is a straight forward transaction. Just fully settled 95% or RM950,000 within 36 months with Zero interest.

MHL Question:
a. If a purchaser does not fully settle within 36 months, what is the interest charge by the developer?
b. Will the developer foreclose the property & evict the client themselves?

2. If the purchaser needs to opt for a bank loan. Then, the situation will be different.

Balance 95%: RM950,000 ( To be settled by buyer within 36 months with Zero Interest)

Bank’s maximum margin is 90%: RM900,000
Balance another, 5%: RM50,000 (Will need to settle by purchaser within 36 months with Zero interest)

Let’s talk about the bank loan, 90% @ RM900,000
Example, after two years of purchasing the house. The customer decides to apply for a bank loan. What will happen?

1. Due to property is a completed property, bank required to do a valuation check.

*If valuation indication is same as or higher than the purchase price RM1million, then the loan will be 90% x Purchase Price RM1 million = RM900,000
*However, if valuation indication lower than RM1mio, like RM900,000.
Then the loan will be 90% x Market Value RM900,000 = RM810,000.
There will be different of RM90,000 to be settled by the buyer.
** The key here are to buy from a reputable developer and a good appreciation value property.

2. Sale of Purchase Agreement Validity
Will the banks have an issue of applying for a bank loan after two years of sale and purchase agreement?
*We think might not be a big deal due to RAP program and reputable developer like SDB.

3. Let’s look at the disbursement timeframe from current to Reside-and-Purchase” program practice.

a.For a completed property buying from a seller ( Subsale Case): A purchaser or purchaser’s bank must fully settle the different of purchase price within 3+1 month from SPA date, date of developer confirmation or date of consent receive whichever later.

b. For under construction: A purchaser or purchaser’s bank must pay or disburse to a developer within 21 working days of billing date.

c. Under “Reside-and-Purchase” program: A purchaser and purchaser’s bank have 1-3 years to perform the disbursement. Depending when a customer is applying for the bank loan. ( Under RAP, customer has lots of time)

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