The idea of buying a new property before it is built, known as ‘off plan’, is an option that’s inviting to many, and its popularity has only been growing. Whether you’re a property investor, or even if you’re looking to buy a home, the attractive brochures with seemingly perfect images of upcoming projects appeal to all.
Although it isn’t as direct as traditional buying, off-plan purchases are becoming increasingly common. Advances in technology allow for vivid computer-generated visuals which help the investor assess what the finished product will look like.
Lower Prices and Flexible Payment Plans:
Off-plan projects are offered at significantly lower prices, allowing the buyer to secure the purchase at below market values. Attractive offers and discounts, as well as flexible payment plans offered to buyers, make off-plan property purchasing very affordable.
Staged payments help you plan and spread costs, enabling the buyer to purchase property without large deposits. Schemes like ‘buy now, pay later’ offer the benefit of a smaller upfront commitment. In such a scheme, the buyer would only have to put down a small percent of the total payment to be made, and then pay the rest after hand-over.
When buying properties as investments, it’s important to look for two key attributes- high returns and capital growth. Features easily achieved by purchasing off-plan properties.
The value of a property at which the buyer secures it in the preliminary stage is likely to have increased by the time the project has been completed, which says that the potential for capital appreciation is much higher, especially if the buyer has purchased the property at a discounted rate. There are factors that play a vital role in value appreciation, such as the locality and neighbourhood in which the property is situated.
If the surrounding area is under development at the time of purchase and is steadily evolving into a well-rounded community, this would lead to a surge in the property’s market value, allowing you to cultivate profitable capital gains. Another feature of off-plan properties is its ability to be sold at profit before completion. Properties enjoy appreciation in value even prior to completion and hence can be sold at a higher market value. Rental income also promotes capital gains.
The ‘Sunset Clause’:
This is a term for the uncertainty in the completion time of projects. It is important to consider and prepare for such delays as it can cause hindrance to the buyer’s schedule. It is good to have flexible plans to accommodate yours so that you’re not caught off-guard if the project delays in completion.
Managing Expectations of the Outcome of Off-plan Projects:
Often, people base their decision to purchase off-plan by looking at glossy brochures, show homes, and floor plans. It is important to remember that these are only predicted outcomes and not real ones. Quality of construction and materials used may alter the end result. Make sure to research the developer and their past projects to evaluate how likely you are to get a good finished product.
Despite the current scenario pointing toward opportunities for capital gains and high ROIs, the opposite could also be true. It is also important to be mindful of the real estate market trends and fluctuations, to make informed decisions when you invest in off-plan properties.
The benefits of off-plan purchasing are many:
- Properties are offered at lower prices
- Developers offer buyers the options of payment in stages, or in custom schemes
- Such financial flexibility provides the benefit of variable upfront commitment, to any degree the buyer is comfortable with
- The high value and capital appreciation, relative to time and completion
The downsides of buying off-plan are few but vital:
- You cannot access ROI immediately as the property is still under development
- Buyers cannot move in or rent it out immediately, for the same reason
- Delays, cancellations and sub-par quality of the final product pose a risk, as you are investing in property that you haven’t seen the real outcome of the building before buying
- Market fluctuations can be unpredictable in some cases