It's Not That Hard To Get A Renovation Loan

Source : The Sunday Times, Dec 21, 2008

No change in loan criteria despite tough times; contractors also have not raised prices

Want to renovate your home? You will be glad to know that getting a renovation loan is not any tougher these days.

According to the Monetary Authority of Singapore's notice for unsecured credit facilities, it has not lowered the maximum cap of six times the monthly salary of the borrower, or $30,000, whichever is lower, for renovation loans since 2003.

A DBS Bank spokesman confirmed that the number of applications for renovation loans has remained relatively constant, and there has not been any change in the criteria for the approval of such loans.

'As renovation loans are governed by regulatory guidelines, the bank has to abide by these guidelines when processing these applications,' the spokesman added.

DBS and Standard Chartered set their minimum loan amounts at $5,000. RHB Bank's minimum loan amount is $10,000. There is usually an administrative fee of 1 per cent of the approved loan.

A check with five banks showed that interest rates can start from 3.88 per cent per annum for RHB Bank, to OCBC Bank's range of between 6.25 per cent and 10.5 per cent per annum.

The rates are subject to change and depend on the choice of interest rate packages.

The interest rates are also usually based on monthly rest, which means that each monthly repayment reduces the loan amount and interest charges.

Applicants have between one and five years to repay a loan.

On the renovation contractors' side, the Singapore Renovation Contractors and Material Suppliers Association said contractors have not increased prices over the years.

Mr Gerald Mark, director of Wing Khiong Construction, said this was because of fierce competition.

'If we increase prices too much, we will lose customers,' he said.

He added that the market practice is such that contractors are reluctant to raise or cut prices too much. As a result, prices remain more or less the same and any increase is 'marginal'.

According to the association, a new three- or four-room HDB flat costs about $15,000 to renovate, although it was quick to clarify that all prices quoted were a rough guide and varied from contractor to contractor.

Mr Mark said the price includes flooring, kitchen cabinets, painting and plumbing works, curtains and cornices.

For the higher-end renovation of HDB four-room flats, prices can go up to between $80,000 and $100,000, he said.

'This is because of the owners asking for design carpentry works, such as the construction of false panel walls,' he added.

Still, the current downturn has led some home owners to tighten their belts. Contractors said that in these tough times, customers are either forgoing renovation works if they have a choice, or cutting down on renovation budgets.

Mr Richard Soon, manager of Luck Ann Construction and Renovation, said in Mandarin: 'If nothing is wrong with your home, you wouldn't do any renovation.

'People are thinking of their rice bowls. Even if they need to renovate, they will do so only at a lower price and not go for the full works.'

Mr Mark agreed, saying: 'What makes it obvious is that usually, the stretch from September up until January, Chinese New Year, is our peak period. So we can see clearly that there is not as much activity now as there was in the year before.'

HSR Property Group executive director Eric Cheng noted that not many people want to renovate their properties, so business has dropped.

'With lower demand come lower prices. You can negotiate for lower prices as companies would be more willing to give a better price,' he said, adding that one might be able to get discounts of between 10 and 15 per cent.

'After Chinese New Year, the rates could be more attractive.'