With exciting launches like Penrith and Skye at Holland coming in October 2025, now is the time to plan ahead. At FairLoan, we help you secure your maximum loan eligibility (IPA) and compare the best interest rates across all major banks. To sweeten the deal, clients who take up their home loan through us will also receive a free iPad,  a perfect start to your new home journey.

 

Penrith 

 

Skye at Holland 

 

If you are purchasing a Building Under Construction (BUC) property in Singapore, choosing the right home loan can make a significant difference to your long-term affordability. Unlike completed properties, BUC loans are structured under the Progressive Payment Scheme, where disbursements are made at each construction stage. This makes the interest cost dynamics unique and selecting the right bank package is crucial.

 

Current SORA Benchmarks (Sept 2025)

• 1-month SORA: 1.30%
  
• 3-month SORA: 1.50%

*MAS DATA

 

BANK	Base Rate	Spread
		YEAR 1	YEAR 2	YEAR 3	YEAR 4
Promo Rate*	3-month SORA	0	0.28%	0.28%	0.28%
Promo Rate*	1-month SORA	+0.25%	0.25%	0.25%	0.25%
Maybank	3-month SORA	+0.25%	0.28%	0.28%	0.28%
DBS	3-month SORA	+0.28%	0.28%	0.28%	0.28%
DBS	FHR6	+0.40%	0.40%	0.40%	0.40%
UOB	3-month SORA	+0.28%	0.28%	0.28%	0.28%
*Limited Tranche

Current 1-month SORA = 1.30%

Current 3-month SORA = 1.50%

 

These benchmarks form the base rate. Banks add a spread (margin) on top, which determines your effective interest rate.

 

Why BUC Loans Differ from Completed Property Loans

1. Progressive Payment Scheme (PPS)
   
   
   • Payments are disbursed in stages (foundation, structural completion, TOP).
   • Interest payments are initially small but grow as disbursements increase.
     
     
2. Deferred Payment Scheme (DPS)
   
   
   • Rare for BUCs today, but sometimes available near completion.
     Requires paying 3% higher property price.
     
     
3. Lock-in Periods
   
   
   • Most BUC loans come with 0 year lock-in periods.
   • Early prepayment allowed for the disbursed portion
     
     
     

Factors to Consider When Choosing a BUC Loan

• Interest Rate Benchmark: Decide between 1M SORA, 3M SORA, or fixed deposit rates.
  
• Spread Consistency: Look at how spreads change year by year.
  
• Lock-in Flexibility: Important if you plan to refinance at TOP.
  
• Total Cost Projection: Calculate not just Year 1 savings but the effective interest cost over 4–5 years.
  
• Promotional Tranches: Attractive entry rates but limited in availability.

 

Why are banks unable to offer Fixed Rate for BUC 

1. Interest Rate Volatility & Bank’s Hedging Costs

• Fixed-rate loans require banks to hedge against interest rate movements (e.g., via swaps).
  
• For BUCs, because disbursement is gradual and unpredictable, it is harder for banks to hedge efficiently.
  
• If global interest rates rise sharply (as seen in 2022–2023), banks would bear disproportionate risk on undisbursed loan amounts if they had promised a fixed rate.
  
  

2. Tenure Uncertainty During Construction

• BUC projects often take 3 to 4 years to complete.
  
• Banks cannot predict exactly when the full loan drawdown will happen. Offering fixed rates during construction could mean they are underpricing risk for several years, potentially leading to losses.

 

Conclusion

Whether you are buying a BUC property for own stay or investment, SORA rates will likely remain relatively low over the next 1 to 2 years. Under the Progressive Payment Scheme, borrowers can expect lighter repayment amounts in the first 12 months, as disbursements are gradual during early construction. Heavier repayments typically begin closer to TOP, 2 to 3 years later.

 

It is crucial to monitor your loan package closely and be ready to refinance or switch to a rate structure that best fits prevailing market conditions once TOP is reached. For investors, remember that the Seller’s Stamp Duty (SSD) of four years still applies, choosing a loan package that aligns with your potential holding and exit strategy is just as important.

 

Ultimately, the best BUC loan is one that balances affordability today with flexibility tomorrow, giving you both short-term savings and long-term stability.