What is ‘Off-Plan’ Property?
In real estate, off-plan refers to property before construction has started. It is generally found that such pre-construction property are targeted towards developers of real estate as well as early adopters. Purchaser are able to secure loans at far better terms of finance from their lenders for off-plan projects.
Property investors can make significant capital gains through off-plan purchases. This typically happens as sellers of an off-plan estate tend to offer substantial financial incentives to those who adopt them early on. Discounts in response to sale plans are quite common. A rising market also provides for opportunity for the growth of capital when development cycles typically range on a year or two.
Advantages of Off-Plan Estates
- In case the area immediately surrounding the estate has access to infrastructure in the form of universities, roads, hospitals and other such public amenities, properties are supposed to be built in the coming few years become even more in-demand.
- When the housing market is witnessing rapid growth this sort of property becomes more lucrative as it is cheaper than constructed property. It also enables the buyer to specify apartment locations and features as the choice may be limited after some time.
Disadvantages of Off-Plan Estates
- In case the values of property witnesses substantial reduction, the loan value is often decreased and may be, as in some cases, be denied. This is truer if the construction is for an investment in comparison to a home. If such an event occurs the buyer may be obliged, under the terms of the contract, to buy the property at the price that was originally offered.
- It might also happen that the constructor finds himself out of business before construction ends leaving the buyer incapable to recover the advanced payments. Bank guarantees are used by countries undergoing recession such as Spain, so that they are protected from bankrupt builders. In times of recession this is a highly risky venture as inflated property prices plummet quickly without clear relief in sight.
- The last issue one might have with off-plan properties is that it may fail to match the expectations of the buyer. This may be due to material defects as well as subjective reasons.