| Photo from Propsearch.ae (cropped) via Steve Derodar
In the past few days, everyone was ecstatic about turning the year anew. For Filipinos based abroad like me, it is not surprising to see skyscrapers as massive and towering as they are, shaped in our cities of modern times. Seeing the fireworks in Metro Manila skylines are just a splendid sight. I can’t help to recall that for years, a number of these buildings- buying residential units were not really hard to purchase, in the sense that there are variable payment terms in any given purchase.
As the saying goes by French writer Jean-Baptiste Alphonse Karr, “plus ça change, plus c’est la même chose,” or “the more things change, the more they stay the same.” Without a doubt, real estate is one fitting industry that best exemplifies how things stay the same, such as how pre-selling properties are sold. Nothing has changed except that there are more available payment terms; a more affordable payment schedule. Often, there are also special promos.
Many of us would agree that the prices from years ago are no longer the same as they are now. Yet, we know that the square footage in real property is what the properties are priced for. In today’s highly competitive real estate market, buying options are well received such that developers offer sweet bites to sweeten the deal. And if you are getting what I am saying, buying properties can come with discounts, credit incentives, and concessions that benefit buyers and sellers.
According to the National Association of Realtors’ 2020 Profile of Home Buyers and Sellers, 46% of sellers offered incentives to attract buyers; these incentives included money for closing costs and repairs and inclusions such as refrigerators, flat-screen TVs, etc. In the Philippines, incentives, discounts, and concessions are standard practice variables for developers. Remember that developers are not the same and can vary offerings also project to project.
For over 20 years now, I have noticed that payment terms in pre-developments remain the same. They are Cash, Deferred Cash, Bank Financing, and sometimes In-House Financing. The specific payment terms are Cash and deferred cash payments, but the shorter the term of payments, the more significant the discounts. Did you know developers usually offer additional discounts for Bank Financed balances for a shorter period?
Paying Cash is the easiest. A total value for money. Paying Cash allows you to lower the purchase price, and there is no mortgage interest. One huge benefit to paying Cash for a home is that you don’t have a monthly mortgage payment. Understandably units are quickly turned over whether or not the units are ready for move-in as the Deed of Property becomes readily available.
Deferred payments are interest-free options that allow you to stretch your allocated Cash within a year or more. They can be offered with substantial discounts. Deferred payment might be 24 months up to 36 months of payment without interest. For some developers, 24 months is the only applicable, can be up to 36 months, depending on the properties or projects. Newly launched condominium projects mainly apply the 36 months payable, and usually, the monthly payments also decrease as it nears its turnover date. Some housing at mid and high-end classification applies the 36 months at 0 % interest but are rare to economic and socialized housing projects.
After building your equity or the downpayment plus additional payments, the bank will pay the balance to the developer, and then you are scheduled to make your mortgage payments to the bank. Usually, these payment terms offer additional discounts as special terms if paid within three years. This is almost deferred Cash, with the bank proceeds paying the whole balance.
In-house financing is a loan directly from the developer. The loan is approved once the buyer can pay the reservation, submit the required documents, and fill out the forms. The interest rates of in-house financing for the loan are also fixed, meaning that the amount the buyer has to pay is not affected by any political or economic developments, which makes bank interest rates rise or fall down. Many favors In-House financing for an easy approval process.
Recently, I witnessed a transaction with a 10% discount from a bank financing payment term. Cash is King, we know, but if Cash isn’t available, Bank Financing offers you the best option as slightly lower interest than In-House Financing, although prepare for income eligibility, allowing you to pay off the purchase balance. In-House might be the best option for smaller amounts as it has higher interest rates plus more accessible approval odds. Payment terms would be a significant decision that any buyer would make, translating to affordability, timing, and convenience.
Is real estate a good investment in the Philippines? Obviously so, there are payment terms to choose from. To add, it has been said that the Philippines has a stable economy and a strong currency. Real estate is a safe investment, and there are many opportunities to invest in this market. The Philippines has a growing economy. Over the past few years, the country has seen an increase in foreign investment, which is expected to continue.
(Stevenson’s experience in Philippine Real Estate spans more than 15 years. He has been involved in horizontal, vertical, vacation, and commercial properties. He has worked as an International Property Specialist for markets in Asia, Europe, and North America with Ayala Land, Federal Land, and Century Properties. Through PhilHouseHunters, he offers real estate investment opportunities, marketing, and consultancy with a key focus on Metro Manila and Mega Cebu areas. Visit www.philhousehunters.com. Email at email@example.com.)