OFF-PLAN PROPERTY INVESTMENT

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By: Magna Carta Law Office

“Off plan” purchase is the purchase of a property which has not been built yet or that does not actually exist or is currently under construction at the time the contract is signed, and the decision to buy is made with only the location and proposed building plans are available for assessment.

Benefits in buying off-plan properties

Buying off-the-plan is one of the easiest ways to acquire a property. Most property developers offer very attractive payment terms allowing you to pay a small deposit which may be settled in several flexible terms and the balance of the purchase price does not need to be paid until the property has been built, which provide buyers with time to plan their finances.

Buyers who purchases in the early phase of a development can have the opportunity to choose the best units which, in time, offer highest capital appreciation, and will also generate the greatest rental incomes.

Generally, the prices of off-plan properties are usually very competitive and can be locked at the market price as of the contract date. Properties appreciate in value between the period of buying off the plan to the date the project is completed.  Properties purchased closer to completion will be more expensive than those purchased early because as the demand rises and more units are sold, the prices of all the remaining units also increases.

Risks involved in buying off-plan properties

  • Buying a property that you cannot physically see or inspect is already a significant risk. This means that when signing the contract, the buyers need to rely only on floor plans and images so the buyer does not exactly know the quality and how the property will look when the construction is finished.
  • One of the biggest risks in buying off-plan properties are project delays. Or in a worst-case scenario, the developer goes bankrupt before completion so there would be a possibility that the project and contract could be cancelled. Some property developers do not have their own funds but instead sources fund from the buyers and other financial institutions.
  • Sometimes a developer may not have received pre-approval. The design or dimensions of the property may change to achieve EIA and committee approval.
  • It is possible that after the property has been constructed, the valuation of the property may be worth less than what you paid for.

Avoiding or minimizing the risks

Investors are advised to take extra precaution before finalizing any transactions.  Due Diligence is a useful tool for estimating the status of a prospective project and the developer which significantly helps to reduce the risks involved in buying a property that has not been built yet.  Legal advice must be obtained before signing any document or paying any money.  The need for thorough detailed due diligence is recommended to begin prior to the signing of a binding contract.  It is recommended that you have a lawyer in Thailand to review the contract drafted by the seller to ensure it is prepared with proper terms and conditions that meets the standard terms as required by relevant laws and confirm that the contract does not contain terms of any hidden cost and drawbacks

It is essential to be aware of any pending or potential legal action involving the property and to make sure that the developer has all of the required permits and legal documentations for a project that is not yet built.  The necessary title and background investigations provide the initial basis to confirm any safe purchase and ensure that both parties deal with each other in a fairly manner.  The failure to conduct the necessary safeguard usually results in terrible consequences such as serious financial and legal distress on the part of the buyer.

 

 

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