Understanding the Progressive Payment Schedule for Under-Construction Properties in Malaysia
Buying a property under construction—also known as a new launch property—in Malaysia comes with its own unique payment structure. Unlike purchasing a subsale property, where the payment goes directly to the previous owner, payments for under-construction properties are made progressively to the developer. These payments align with different stages of the property’s development.
Whether you’re a first-time buyer or a seasoned investor, understanding this process is crucial. Let’s dive into the key milestones of the Progressive Payment Schedule and what they mean for you.
What is a Progressive Payment Schedule?
When you purchase an under-construction property, payments are divided into several stages based on the completion of construction. This approach ensures you only pay for what’s already built.
The schedule is broken into five main phases:
- Signing the Sale and Purchase Agreement (SPA)
- Completion stages of the development
- Vacant Possession (VP)
- Submission for subdivision of the building
- Final payments
Breaking Down the Key Stages
1. Signing the Sale and Purchase Agreement (SPA)
The SPA is your first official step as a property buyer. It’s a legally binding document that outlines the details of the property, from the number of parking lots to the exact specifications of your unit.
When signing the SPA, which must be done in the presence of a lawyer, you’ll make an upfront payment of 10% of the property price. This marks the beginning of your commitment.
2. Completion Stages of the Development
After signing the SPA, your payments will follow the construction progress. These stages are further broken down as follows:
a) Ground Level and Foundation Works
- Residential Properties: No payment is required until piling or foundation works begin.
- Commercial Properties: Payments may start immediately based on SPA terms.
Once piling begins, you’ll pay 10% of the property price.
b) Structural Framework
As the building’s framework and floor slabs take shape, 15% of the payment is due. Loan repayments often start here for buyers with financing.
c) Walls, Doors, and Windows
When construction reaches your specific unit’s floor, an additional 10% payment is required.
d) Roofing, Wiring, and Cabling
At this stage, another 10% is added as electrical wiring, roofing, and cabling work are completed.
e) Sewerage and Plumbing Works
This phase requires a 5% payment.
f) Internal and External Plastering
Once plastering begins, a 10% payment is due.
g) Drains Serving the Building
The next 5% payment covers drainage works.
h) Roads and Infrastructure
The final 5% payment in this phase goes toward building access roads and other essential infrastructure.
3. Vacant Possession (VP)
The VP stage is a major milestone—your property is now complete! You’ll receive your keys, with utilities like water and electricity ready for use. At this point, you’ll need to pay an additional 12.5% of the property price and begin full loan instalments.
Around six months after receiving the keys, you’ll also need to settle the Memorandum of Transfer (MOT) fee to officially transfer ownership.
4. Submission for Subdivision of the Building
For strata-titled properties like condos, this stage involves the submission of documents for subdividing the building into individual units. This step is essential for transferring ownership.
5. Final Payments
The last payment ensures the developer has fulfilled all obligations, including defect rectifications. Once completed, you’re officially the full-fledged owner of your property!
Why Understanding This Matters
The Progressive Payment Schedule ensures transparency and protects buyers by aligning payments with actual construction progress. For developers, it ensures a steady cash flow to complete the project.
By understanding this system, you can better plan your finances and avoid unexpected costs.
Simplifying 100% Instalment Payable
In short, the 100% instalment payable occurs gradually, aligning with your property’s completion. From the initial 10% at SPA signing to the final payments post-completion, the process is structured and manageable, ensuring you pay for what’s built.
This approach not only protects buyers but also ensures a smooth and transparent transaction. Whether you’re navigating your first purchase or adding to your portfolio, partnering with a professional agency can make the process seamless. Let us guide you every step of the way!
Feel free to share your thoughts or let us know if you’d like assistance with your property journey. We’re here to help!
