DIBS vs progressive payments — what's the real IRR?

A quick history

DIBS — Developer Interest-Bearing Scheme — was the headline incentive on Malaysian new launches from roughly 2009 to 2013. The developer absorbed the loan interest during the construction period (typically 24–36 months). Buyers paid nothing out of pocket until vacant possession (VP). Combined with rebates, some launches were effectively zero-down with zero carrying cost.

Bank Negara banned DIBS for new launches in 2014. The reasoning was straightforward: the scheme hid the true cost of leverage from buyers, inflated SPA prices, and concentrated risk on the lender if the buyer walked away post-VP. What replaced it is what we've had ever since — progressive payment (also called "progressive billing"), where the bank releases the loan in stages tied to construction milestones, and the buyer pays interest on whatever has been drawn so far.

Why nobody models it

Progressive interest is brutal to compute by hand. The disbursement schedule isn't linear — it follows Schedule H of the Housing Development Act, an S-curve that starts gentle (piling), steepens through the structural and finishing stages, then plateaus into VP. Your monthly interest bill depends on how much has been disbursed by that month, which depends on which milestones the developer has claimed.

Most online calculators skip this entirely. They either treat the construction window as a free period (DIBS-style, which is wrong today) or they assume linear drawdown (also wrong — you pay more early than linear suggests once piling is done). Both mis-state the IRR, sometimes by a lot.

The Schedule H curve

Here's the cumulative disbursement curve PropBook's engine uses to model progressive interest, normalised so that 100% is reached at vacant possession:

Two things to notice. First, by the time the project is one-third built (roughly 8 months into a 24-month window), the bank has already released over a third of the loan — and you're paying interest on that whole tranche. Second, the curve plateaus near the end: the last 10% of construction time only releases about 18.5 percentage points of the loan, because most large milestones are earlier.

A worked example

Suppose you sign SPA on a RM600,000 unit at 90% loan (RM540,000) at 4.2%, and the construction window is 24 months from SPA to VP.

If you assume zero interest during construction (the DIBS mental model), your IRR will only count installments from VP onwards. Cleanly wrong.

If you assume linear drawdown (50% drawn at month 12), you underestimate early-stage interest. Less wrong, still wrong.

Using the Schedule H curve, your monthly interest bill in month k of 24 is:

interest_k = 540,000 × (4.2% / 12) × cumPct(k/24) ÷ 100

Sum across 24 months and you get roughly RM27,000 of interest paid before you hold keys. That's not in the SPA. That's not in the listing brochure. It is real money out, and it hits Deal IRR every bit as much as a post-VP installment does.

On a 35-year hold, RM27k of upfront-ish interest knocks Deal IRR down by something like 0.4–0.6 percentage points. If your un-modelled IRR was 6.5%, the honest one is closer to 6%. Still ahead of EPF (6.15% in 2025) and a 2.75% FD, but not by as much as the brochure suggests.

Special cases the engine handles

Late-stage buyer — you signed SPA when the project was already partway built. Less under-construction interest than a day-one buyer. PropBook supports an under_con_start_pct override so the curve starts at the right percentage rather than at zero.

You have actual drawdown dates — if your bank gave you a statement of when each tranche was released, drop in explicit drawdown events with cumulative percentages. The engine uses those instead of the curve, piecewise-constant between dates.

You don't want to model it precisely — fine, omit the under-construction window entirely and record whatever actual interest expense you paid as plain expense events. The numbers won't be wrong, just less granular.

The takeaway

DIBS is gone; the comfortable mental model that came with it should be too. Off-plan in Malaysia today means progressive interest, and progressive interest means you carry real cost before you have any tenant. A property calculator that ignores this is reporting an IRR that's 30–60 basis points too kind on a typical 24-month window — enough to flip a borderline deal from "beats EPF" to "ties EPF." If you're evaluating a new launch, model it.