Thursday, February 5, 2009

Frasers Centrepoint Previewing Caspian Soon

Source : The Business Times, February 4, 2009

Average price of low to mid-$600 psf and interest absorption expected

DEVELOPERS of at least two residential projects will be testing the market with previews soon, offering interest absorption schemes that mimic the old Deferred Payment Scheme (DPS).

First off the mark will be Frasers Centrepoint, which will begin to preview later this week its Caspian condo, a 99-year-leasehold project next to Lakeside MRT Station. The price is expected to be in the 'low to mid-$600 per square foot range' on average, to appeal to HDB upgraders.

Over at the corner of Alexandra Road and Commonwealth Avenue, Yi Kai Development and Fission Group are also expected to begin previews soon for Alexis @ Alexandra, a 293-unit freehold project comprising mostly smallish units of one and two bedders. The average pricing is tipped at above $1,000 psf. One-bedroom apartments will be priced at below $500,000. The development is near Queenstown MRT Station.

Developers of both projects have tied up with United Overseas Bank (UOB) to offer an interest absorption scheme (IAS), which, like the now-scrapped DPS, eases cash flow for buyers, as they do not make any payments beyond an initial downpayment until the project receives the Temporary Occupation Permit (TOP). This is expected to be around 2012 for both projects.

IAS buyers will have to sign up immediately for mortgages with UOB and make a 20 per cent downpayment using cash and CPF savings. UOB will pay progress billings during the projects' construction to the respective developers.

Buyers will not service the principal amount of the loan while the projects are being built, as UOB will defer collection on the principal during this period.

Collection of the interest will not be deferred; however, this will be serviced or absorbed by the developer on behalf of its buyers.

After the project receives TOP, the buyer will have to start servicing both principal and interest.

Property agents say typically, those who buy on IAS pay about 3 per cent more on the purchase price of the property than buyers who make normal progress payments.

This price differential is similar to the 3-5 per cent premium that DPS buyers used to pay compared with purchasers who opted for the normal progress payment scheme.

However, market watchers say the good thing about IAS is that buyers have to secure a housing loan at the outset from the bank, and this entails a mandatory credit-assessment of the buyer. This would weed out poor-quality borrowers dabbling in properties beyond their means, something DPS has been criticised for.

Frasers Centrepoint's Caspian, near Jurong Lake, will have a total of 712 units housed in 11 blocks, all 17 storeys high. Units range from studios to four bedders with study rooms.

The development is next to the group's Lakeholmz condo.

Market watchers note that the low to mid-$600 psf average price said to be targeted by Frasers Centrepoint is lower than the average of about $750 psf at which units in The Lakeshore, a completed development nearby, have been selling at in recent months.

'However, Caspian is a new launch with over 700 units and they have to price it more affordably if they want to attract HDB upgraders and investors in today's recessionary climate,' an analyst said.

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