In the simplest of explanations, the off-plan purchase of property involves making payments towards the acquisition of a property that is in its early stage of construction, or even before construction begins.
The payment is structured in different ways, as mutually agreed upon between the buyer & the seller. It could be monthly payments, quarterly payments, based on construction milestones, or even entirely upfront.
Needless to say, it is a risky affair. The buyer is putting in their stake, prior to the delivery of the goods by the seller. Some of the attractions of this purchase arrangement include;
* Relatively lower purchase prices compared to when the property is ready.
* Customized payment plans, suitable for the buyer’s cash flow.
* Avoidance of borrowed funds (mortgage), which attract interest.
* Possibility of customizing the features of the property during construction.
In the evaluation of the risk factor, the most common consideration for the buyer should be the seller’s track record/delivery record. A new entrant in the property development business would pose the greatest risk, while a developer who has delivered projects before would be a safer bet. Bottom-line though, it is indeed a risky engagement, owing to a variety of factors; some within the developer’s scope of influence, and others beyond. Other risk-factor assessment indicators include;
* Professional & business track records of the directors/ownership behind the project.
* Industry partnerships the developer is in; financial, legal, construction partners, etc.
* Project feasibility & execution details; design plans & approvals, site acquisition & preparation, materials acquisition & showcasing, sample houses, delivery timelines, etc.
Above all, prospective property buyers should always engage industry experts for guidance & recommendations. These include property agents, valuers, architects, engineers, lawyers, financiers, etc. Their services come at a fee, but the cushion provided is definitely worth the while.
Feel free to get in touch with us if you’re considering making an off-plan purchase, or even for a ready property – we’re happy to guide you.
