Financing property in Geylang

Historical homes in the Geylang area.

In the past, most banks would refuse to lend money to buyers of Geylang properties due to its shady image. But in recent years, efforts to transform the area from vice to nice have seen lenders loosen restrictions.

By Paul Ho

What comes to your mind when you hear the word Geylang?

For many people, it’s the various durian stalls and great food options, but others point to its seedy reputation, especially at night.

Despite this, there was a run up in property prices and rents in Geylang between 2006 and 2013, as a large inflow of expatriates saw it as an alternative residential location near the Central Business District. Distance-wise, Geylang is just 2.5km from shops and offices at Bugis Junction, and it is also near Suntec City and Marina Square. At the same time, the area is fast becoming a second Chinatown where new citizens and permanent residents from China congregate. In recent years, new residential and commercial projects have sprung up in Geylang to meet this demand.

Changing face of a red-light district

Previously, there were legal brothels operating from even number lorongs (“streets” in Malay) 4 to 40, and there were also numerous KTV pubs. Much of the vice activities would spill over onto the odd number lorongs, with some prostitutes renting rooms in nearby budget hotels to ply their trade. A significant number of these hotels were completed from the year 2000 onwards, offering hourly rates. This meant that hotels could reap high yields for each room. This led to many low-rise shops and homes being torn down to make way for hotels.

Small residential and commercial lots were subsequently amalgamated and developed into hotels. Larger projects such as condominiums could take up 10 to 30 lots.

The biggest condominium in the area right now is The Waterina along Lorong 40, which comprises 398 units and is a freehold project. It was completed in 2005.

There’s also the 142-unit freehold Atrium Residences along Lorong 28, which was completed three years later.

This contributed to many brothels moving out from Lorong 28 onwards. They are now mainly concentrated along lorongs 6 to 20, with very few brothels operating beyond Lorong 24.

Bank financing in Geylang

Unsurprisingly, most banks used to shy away from offering loans to buyers of Geylang properties, especially the even number lorongs. There were exceptions like The Waterina. Even so, the choice of banks was limited to just two players – Hong Leong Finance (HLF) and Singapura Finance.

After the 2010 to 2011 period, more banks began to offer loans for properties from lorongs 30 to 40, but anywhere below Lorong 30 was still a challenge.

At present, both OCBC Bank and Maybank do provide financing for properties from Lorong 30 onwards. For HLF and Singapura Finance, it continues to be across all the even number lorongs, subject to the customer’s profile.

OCBC and Maybank may offer financing for properties in Lorong 26 and 28, but subjected to the project type and customer profile.

Some lenders even impose a loading fee of 0.25 percent on top of their usual lending rates for even number lorongs.

Getting a maximum loan of 80 percent is possible for owner occupied properties from Lorong 30 onwards, subject to the Total Debt Servicing Ratio (TDSR) rules and credit profile of borrowers.

More homes being built

Over the years, many private properties have come on-stream at lorongs 24, 26 and 28. In fact, the entire area now has a more residential feel. As such, there are one or two banks financing properties in lorongs 26 and 28, subject to it being owner occupied and the loan-to-value (LTV) limit being around 70 percent. If your credit profile is strong, you may be eligible for an 80 percent loan.

In our private conversations with banks, there’s one lender other than HLF and Singapura Finance that may be able to finance properties from lorongs 6 to 24, with the LTV limit capped at around 50 to 60 percent for clients with good credit profiles. However, those who opt for a 70 to 80 percent loan usually stick with HLF or Singapura Finance.

Meanwhile, some banks still view Geylang as a risk and impose LTV restrictions as well as a cap on the maximum loan quota for the area.

You will sometimes hear comments such as: “Normally we can finance this project, but we have no more quota this month”. This is an example of a cap in the quota to limit their risk. Certain banks also require approval from higher level management for Geylang properties.

These restrictions also apply to odd number streets that are near lorongs 6 to 24, but to a lesser extent.

While we are seeing a positive change in the overall character of Geylang, there is some concern that it may lose its unique charm and become too sterile.

Paul Ho is the founder of www.iCompareLoan.com

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