Monday, July 14, 2008

Loan Sub-Sale - for properties still under construction

A couple of months ago, I posted a question - which bank would approve a loan for sub-sale of a property still under construction. I managed to sell my unit in 231TR, Jalan Tun Razak ( while it is still under construction with vacant possession still 3-4 months to go. While the developer has agreed to provide consent for transfer of the property, all the banks told my buyer to wait till the key is handed to me before the loan can be processed.

The developer had offered purchasers 0% interests during construction period. However, the catch is, purchasers must subscribe to those 0% interests in the 1st year loan packages. Those packages comes with very draconian conditions such as 3% penalty if redeemed within 5 years and non-zero cost. The legal fees for the bank loan came up to almost 1.5% of property price and a further 1% for the stamp duty. Despite the developer's effort to make this property a flipping-friendly investment, the extra costs says otherwise. Moreover, since this is a commercial development which started before the new HDA ruling came into force, the developer managed to get exemption from the ruling. The impact on investors is the 1% fee payable to the developer for consent of transfer.

So, all in with the non-zero cost bank loan conditions, stamp duty and consent fee, there is an additional top up of 6.5% cost for property flippers. One might argue that the developer has been paying the bank the remaining period of construction's interests. But I am sure the developer would have already costed this into the property price.

Anyway, back to our topic for today which is loan application for sub-sale of properties still under construction..... this morning, my buyer called and informed me that Public Bank has approved his loan for 90% financing with interest rate of BLR - 2%. This is extremely good news. It means, with the consent of transfer which the developer agreed to provide before vacant possession, I can probably just get away with paying minimal interest during hand-over period. I am pleasantly surprised with Public Bank's aggressiveness during this period of "economic slowdown (what economic slowdown?)". And certainly I am sure Public Bank has also taken into consideration my buyer's sound financial standing and reputation before making this outstanding offer.

Congratulations to Public Bank!

1 comment:

Anonymous said...

and I thought Public Bank was an old conservative china man bank.