What is an off-plan property?

Off-plan properties are usually a few units in a residential or commercial real estate development project set aside by the developer to be sold at discounted prices before the actual construction commences or in the early stages of the construction in order to raise funds for the project. Because these sales are made early on in the life cycle of the project, the project developers often offer buyers good discounts, incentives and ample time to spread their payment during the delivery time-frame of the project.

Benefits of buying an off-plan property

Investing in off-plan property has its benefits and these benefits may vary from developer to developer depending on the scale of the project and conditions of the market at the time. Below we’ll look at some of the benefits in buying an off-plan property.

Good price offers

 Developers often give good price discounts at the early stages of real estate development projects in order to kick start and promote the project, which makes the properties often less expensive to buy than existing homes with similar features within the same location. Often, properties that are sold within the first phase of development are more affordable than those sold in the later stages when the project has advanced and nearing completion.

Flexible payment options

Buying off-plan property offers the buyer or investor the luxury of spreading the total payment for the property across the development time-frame of the project which is usually between 6 to 18 months depending on the scale of the project. In this way, the buyer can break the total amount for the property into multiple installments and make payments at various milestones of the project or agreed upon times.

Good return on investment

Off-plan property offers good return on investment as the value of the property variably appreciates as the project advances and gets completed bearing that the developer sold the off-plan units at discounted prices in comparison to similar finished properties with similar specifications in the same area.

Design personalization

Off-plan properties offer buyers the ability to make their inputs and personalise the property to some degree regarding the finishes and materials used for some aspects of the build. This offers the buyers certain amount of freedom in customizing the internal design and layout of the property to suit their needs.

Risks of buying an off-plan property

Every investment or business possesses its risks, and buying an off-plan property is not different either. In as much as off-plan property has many benefits, below are certain risks associated with off-plan properties buyers and investors should be aware of:

Project abandonment

The biggest risk a buyer may encounter after buying an off-plan property is that, for one reason or another the project may fail to materialize as the developer may abandon the project due to any of the following reasons: dispute on the land, development approval issues from the required authority, run bankrupt, failure to have a succession plan in place in case of death, etc,.

Project delivery delays

Project delivery delay is another risk factor when buying in an off-plan property. Sometimes, this may be the developer’s faults or it may be due to unforeseen circumstances beyond his control. Factors that delay new developments projects may range from lack of funds, administrative permits, natural disasters, site accidents, legal issues, etc.

Sub-standard delivery

Because you do not see the finished property before committing to the investment, it’s common for some developers to deliberately deliver sub-standard projects especially when they run into financial difficulties in the course of the project. It’s important to always check-in on the progress con the construction to see what the developer id doing and make necessary inputs when needed.

Questions to ask the developer before buying off-plan property

It’s important to do extensive research on the developer before committing to an off-plan purchase as this will spare you unnecessary disappointments. When evaluating a potential off-plan developer, investigate the following:

• Request for the titles of the land and the development approvals to enable you engage a property and legal expert to carryout the required due diligence to ensure that the land for the development has no encumbrance and all the required building permits have been granted.
• Ask to see their past projects and physically visit the various sites to assess the developer’s quality assurance. While visiting their past sites, do well to connect with any of their past buyers to learn from their experiences with the developer.
• Ask about their financial health and integrity to be reassured that the project won’t get abandoned.
• Ask the developer about his age and experience in the property development market.
• Get information about the management and maintenance of the property after completion.
• Also feel free to ask the development any questions you deem necessary.