26 May 2017

Payment Plans Curiouser and Curiouser!

In response to the declines of prices and transactional activity in mid-2014, developers started offering a variety of incentives in the form of payment plans in an attempt to stimulate demand. Payment plans have progressively eased from 2013 (when more than 80% of launches had payment terms that were front ended) to 2016 when more than 55% of launches had back ended and post-handover payment plans. In 2017 as transaction volumes have surged, developer launches appear to be recalibrating towards an equilibrium; however it is likely that such payment plans will continue to be “tweaked” in response to changes in the price cycle.

The decline in prices and transactional activity in the real estate market from mid-2014 triggered a response from developers to ease payment terms in an attempt to stimulate demand. The above graph illustrates how payment plans have progressively eased from 2013 (when more than 80% of launches had payment terms that were front ended) to 2016 when more than 55% of launches had back ended and post-handover payment plans.

Both private sector and government sector developers began to change their payment plans from being front loaded to back ended in mid-2014 as the market began to correct itself.

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