Off-plan property is a plan prior to its construction. Buying of off-plan property therefore means purchase of the property such as apartment from property developer before its construction commences. The purchaser of the property is required to pay the developer a certain percentage of the actual amount of the property at the time of purchasing. The remaining amount of the property would be paid when the construction of the property is completed. Depending on the agreement, the developer may also require that the buyer pays the remaining amount in instalments.
Advantages of Off-Plan Property
Housing market has been smoothly rising over the past few years. This has led to the rise in purchase of the off-plan property by home owners as well as property investors. There are many advantages which come along with buying of property before its construction is completed.
Some of these advantages include:
1. Price speculation: Property investors purchase off-plan property with expectation that prices may rise in future enabling them to achieve capital appreciation. The agreed payment at the time of purchase is normally lower than the future price in a good housing market. This gives the investors capital gain when they sell the property after completion. For buyers who are purchasing a home they have advantage of making a payment, which would be lower than if they had bought a fully built house.
2. The initial capital outlay is low. The investor has to pay a percentage of the actual amount at the time of purchasing of the property. The rest of the amount would be paid later, which provides the investor or home owner an ample time to pay the remaining amount.
3. Home buyers have an opportunity to choose their desired location and property that suits their needs rather than when they purchase a fully built property.
4. Some developers may allow the buyers to sell some unit of the property prior to the completion of the construction. This normally happens when the prices are high and would enable them to gain some profits.
Disadvantages of Off-Plan Property
Off-plan property has been regarded as the best investment opportunity. Despite this, there have been some disadvantages. You would agree that buying a property that has not been built involves a lot of risk. Sometimes your risk may not be worth taking.
Some of these disadvantages include:
1. Future price of the property may fall. When the prices falls the buyer may accept to pay as agreed or may pull out of the agreement. When this happens, the investor may incur a huge loss. When the value of the house falls during construction, the developer may be denied financial assistance from their financiers. This may highly affect the construction of the property.
2. Developer may become bankrupt in the course of construction and the buyer may not be paid back the initial deposit. In this case, the buyer may lose his/her initial deposit. Buyers who are purchasing the property for investment purposes also may lose capital and this would interfere with their investment activities.
3. Developer may sell the property when its construction is almost finished at its future price and pay back the deposit to the buyer. This normally happens when the prices are higher and the developer may decide to go against the deal. This affects investments for those buying the property for investment purposes as their money would not change in value and the purpose would not be achieved.
Importance of Using Property Lawyer
It is crucial for anyone looking to enter into agreement of an off-plan property to have an independent lawyer who understands land policy. A lawyer plays a major role in purchase of the property. You should have in mind that you are purchasing a promise that your property would be built, which means it involves a lot of risk. You should therefore consult your lawyer prior to the signing of contract. This would ensure that you get the necessary legal advice which is important in decision making. If you get into any dispute in the future, your lawyer would act on your behalf by taking the legal action. You should be careful to choose a lawyer whom you believe would be on your side rather than that of your developer.