Progressive Interest on a Housing Loan in Malaysia: How It Works (Schedule G & H)

Progressive interest is the interest you pay on a housing loan for an under-construction property while the bank releases the loan in stages. You only pay interest on the amount released so far, so the bill starts small and grows with each construction stage, and your full instalment usually starts once the loan is fully released.

This guide shows the official payment stages in the Malaysian sale and purchase agreement (SPA), how to estimate each month's progressive interest, and what to budget for between signing and getting your keys.

Why a new launch is paid in stages

For new homes sold by licensed developers, the SPA has to follow a standard form under the Housing Development (Control and Licensing) Regulations 1989. Schedule G is for landed homes (terrace, semi-D, bungalow) and Schedule H is for strata homes (condo, apartment, serviced residence under the Act). Both were replaced by the 2015 amendment regulations, in force from 1 July 2015.

The Third Schedule of each SPA sets the payment schedule. You pay 10% when you sign. After that, the developer can only bill you as each stage is finished, and every bill must come with a certificate from the developer's architect or engineer. You (or your bank) then have 30 days to pay each bill.

Your bank pays its share of each bill straight to the developer. That release of money is called a progressive disbursement (or drawdown), and the interest on it is the progressive interest.

The payment stages (Schedule G and Schedule H)

The percentages are the same for landed and strata homes. They're a percentage of the purchase price:

• Item 1 – On signing the SPA: 10%
• Item 2(a) – Foundation (Schedule H: work below ground level, including the foundation): 10%
• Item 2(b) – Structural framework: 15%
• Item 2(c) – Walls, with door and window frames in place: 10%
• Item 2(d) – Roofing/ceiling, electrical wiring, plumbing (without fittings), gas piping and internal telecom trunking and cabling: 10%
• Item 2(e) – Internal and external finishes, including wall finishes: 10%
• Item 2(f) – Sewerage works: 5%
• Item 2(g) – Drains: 2.5%
• Item 2(h) – Roads: 2.5%
• Item 3 – Vacant possession (VP), with water and electricity ready for connection: 17.5%
• Item 4 – On VP, when the title is delivered (individual title for landed; transfer form plus strata title for strata): 2.5%
• Item 5 – On VP, held by the developer's lawyer as stakeholder: 5%. Of this, 2.5% is released to the developer 8 months after VP and 2.5% after 24 months. This is the money that protects you during the defect liability period.

That adds up to 100%. The developer doesn't have to build in this exact order, so you may get bills in a different sequence, but each bill still needs a stage certificate.

The SPA also sets the deadline for VP: 24 months from the SPA date for Schedule G, and 36 months for Schedule H.

Built-then-sell projects use Schedules I and J instead: 10% on signing and 90% on VP with the Certificate of Completion and Compliance (CCC). There's no progressive interest there, because the bank releases the loan in one go.

How to calculate progressive interest

The basic estimate is simple:

Monthly progressive interest ≈ amount released so far × annual rate ÷ 12

Banks actually charge on a daily-rest basis, so the real figure moves a little with the number of days in the month. Use this formula for budgeting, and use your bank statement for the exact amount.

Two rules decide what you'll pay:

1. Your own money goes first. If your loan is less than 90%, you normally pay the difference (the "differential sum") to the developer before the bank releases anything. With an 80% loan, you pay the 10% on signing plus the next 10% bill yourself.
2. The bank pays from there onwards. Each later bill increases the amount released, so your monthly interest steps up.

Once the full loan has been released (usually around VP), the bank switches you to the full monthly instalment for your tenure. Your letter of offer states exactly when that switch happens.

Example 1: RM500,000 condo, 90% loan (Schedule H)

Aina buys a new condo for RM500,000. Her loan is RM450,000 (90%) at an assumed 4.25% a year for 35 years. She pays the 10% (RM50,000) on signing from her own savings. The bank pays everything after that. To keep it simple, assume the stages finish in the months shown.

• Month 4 – Foundation (10%): bank releases RM50,000 → interest about RM177.08 a month
• Month 10 – Structural framework (15%): RM75,000 → total RM125,000 → about RM442.71 a month
• Month 16 – Walls (10%): RM50,000 → total RM175,000 → about RM619.79 a month
• Month 22 – Roofing, wiring, plumbing (10%): RM50,000 → total RM225,000 → about RM796.88 a month
• Month 28 – Finishes (10%): RM50,000 → total RM275,000 → about RM973.96 a month
• Month 31 – Sewerage (5%): RM25,000 → total RM300,000 → about RM1,062.50 a month
• Month 32 – Drains (2.5%): RM12,500 → total RM312,500 → about RM1,106.77 a month
• Month 33 – Roads (2.5%): RM12,500 → total RM325,000 → about RM1,151.04 a month
• Month 36 – VP, title and stakeholder sum (25%): RM125,000 → total RM450,000 → full instalment of about RM2,060.52 a month

Over the 36 months before VP, Aina pays about RM20,763 in progressive interest in this example. That interest doesn't reduce her loan. It's the cost of borrowing the money that's already been released.

If the strata title isn't ready at VP, the 2.5% in item 4 is released later, so her interest just before that point is on RM437,500 (about RM1,549.48 a month).

Example 2: RM650,000 terrace, 80% loan (Schedule G)

Daniel and Mei buy a landed terrace for RM650,000 with an 80% loan of RM520,000 at an assumed 4.25% for 30 years. Their own portion is 20%, or RM130,000.

• Signing (10%): they pay RM65,000
• Month 3 – Foundation (10%): they pay another RM65,000. Their differential sum is now fully paid, and the bank has released nothing yet, so there's no interest.
• Month 7 – Structural framework (15%): bank releases RM97,500 → about RM345.31 a month
• Month 11 – Walls (10%): total RM162,500 → about RM575.52 a month
• Month 15 – Roofing and services (10%): total RM227,500 → about RM805.73 a month
• Month 19 – Finishes (10%): total RM292,500 → about RM1,035.94 a month
• Month 21 – Sewerage (5%): total RM325,000 → about RM1,151.04 a month
• Month 22 – Drains and roads (5%): total RM357,500 → about RM1,266.15 a month
• Month 24 – VP, title and stakeholder sum (25%): total RM520,000 → full instalment of about RM2,558.09 a month

Their progressive interest before VP adds up to about RM12,661. A bigger down payment means the bank starts releasing later, so there's less progressive interest. It's still the same loan once the house is done.

You can check the full instalment for your own loan amount, rate and tenure with the housing loan calculator.

Budgeting while the property is being built

Many buyers are still paying rent during construction, so progressive interest sits on top of rent. In the final months it can get close to a full instalment. A few things to plan for:

• Use the full instalment for your affordability test. Banks assess your debt service ratio (DSR) on the full instalment, not the small early interest bills.
• Expect an uneven schedule. Stages don't arrive evenly. Two or three bills can come close together near the end.
• Pay on time. Under clause 10 of the standard SPA, a bill left unpaid after 30 days carries late payment charges of 10% a year, calculated daily. A RM75,000 bill paid 20 days late would cost about RM410.96 (RM75,000 × 10% × 20 ÷ 365). The developer can't charge it if the delay is caused by an incomplete claim notice or by the developer's own financier.
• Know your late-delivery right. If the developer misses the 24- or 36-month VP deadline, the SPA gives you liquidated damages of 10% a year of the purchase price, calculated daily. For a RM500,000 home delivered 60 days late, that's about RM8,219.18.

Common mistakes

• Treating the progressive interest as the instalment. RM177 in month 4 isn't your real cost. Budget for the full instalment from day one.
• Thinking progressive interest pays down the loan. It doesn't. During construction, you're usually paying interest only.
• Forgetting the differential sum. With an 80% loan, the first 20% comes from your pocket before the bank releases anything.
• Ignoring item 4 and item 5. The title payment and the 5% stakeholder sum are part of the price. The stakeholder sum also matters if you report defects within the defect liability period.
• Using a calculator's full instalment to check your early bills. Calculators assume the whole loan is released on day one. See why your bank repayment differs from calculators for the other reasons the numbers won't match.

Quick checklist

1. Check whether your SPA is Schedule G, H, I or J. Only G and H have progressive payments.
2. Work out your differential sum (purchase price minus loan amount).
3. For each stage, add the bank's release to the running total and multiply it by your rate ÷ 12.
4. Compare each bill from the bank with your estimate, and query anything that looks off.
5. Put the full instalment in your budget from the start, and read the first-home buyer checklist for the other upfront costs.

The 4.25% rate in both examples is illustrative only, not a quote. Your rate depends on your bank's standardised base rate (SBR) plus its spread, and on your letter of offer. All examples use a monthly approximation of the bank's daily interest calculation.