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What does “off-plan” property purchase mean?
“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 upon signing the contract. Therefore, you are deciding with only the location and proposed building plans are available for assessment.
What are the benefits of 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. These terms would allow you to pay a small deposit which you can settle in several flexible terms and you only need to pay the balance after the property has come to completion. This provides buyers with time to plan their finances.
Buyers who purchases in the early phase of a development can choose the best units. The units that would, in time, offer highest capital appreciation, and will also generate the greatest rental incomes.
The prices of off-plan properties are generally very competitive and locked at the market price as of the contract date. Properties appreciate in value between the period of buying off the plan to the project’s completion date. Properties purchased closer to completion will be more expensive than those purchased early. This is due to the fact that as the demand rises and after selling more units, the prices of all the remaining units also increases.
What are the 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 on floor plans and images. Therefore, the buyer does not know exactly the quality and how the property will look after completion.
- One of the biggest risks in buying off-plan properties are project delays. In a worst-case scenario, the developer goes bankrupt before completion so there would be a possibility of cancellation of the project and contract. 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 completion, the property’s value is worth less than what you paid for.
How to avoid the risks?
Investors must take extra precaution before finalizing any transactions. Due Diligence is a useful tool for estimating the status of a prospective project and the developer. This procedure significantly helps to reduce the risks involved in buying a property that has not been built yet. You need to seek legal advice before signing any document or paying any money. We recommend you begin conducting a thorough due diligence before signing a binding contract. You need to have a lawyer in Thailand to check the contract drafted by the seller to make sure that the terms and conditions meet the standards required by relevant laws. The lawyers will also help to confirm that the contract does not contain terms of any hidden costs and drawbacks.
It is essential that you are aware of any pending or potential legal action involving the property. You also need to make sure that the developer has all the required permits and legal documentation for an off-plan project. The title and background investigations provide the initial basis to confirm any safe purchase. The failure to conduct the necessary procedure usually results in serious financial and legal distress on the part of the buyer.