Buying off plan (pre-completion of the project) often scares new home buyers. It can be worrying to put your money into a home you can't yet see or touch. However, buying off plan can make dream homes of high quality a possibility, on a budget that wouldn't normally go so far on completed properties.
With that in mind, here are some things to consider before making a decision to purchase any off-plan unit.
What does it mean to "buy off a plan"?
Buying off-plan means buying real estate at a point where all there is to see is a plot of land and a house plan. You sign a contract indicating a purchase price for the land, and a house to be built from a specific set of architectural plans, and generally pay instalments as the construction progresses. When the building is finished, the developer hands you the keys to your new home! The same applies for a condo, retail property or any other type of property yet to be completed. “New Development” is another term which is related to off-plan property, and it also applies to many Borey projects currently under construction.
Why buy off the plan?
Getting in at the planning stage of development gives buyers the chance to get the best offerings of plots of land, or the prime units in a building. Coming in at a later stage is guaranteed to limit the selection available to you. Buyers who know what they are looking for may actually prefer to invest at this stage. Plus, buying off plans can allow for a higher level of customization, such as changing the floor plan, merging two adjoining condo units into one larger unit, and having more say in details such as the type of appliances and furnishings. More fussy buyers who desire to have a great deal of control over every detail are often most satisfied with a purchase made at this stage. It allows them to get exactly what they want from their property purchase.
Off-plan buyers also may also receive discounts on the price, or see substantially more capital growth than buyers at a later stage. Investors and speculators find these two facts compelling, especially when they are combined. In Phnom Penh, buying during the pre-sale period can result in an appreciation of up to 30 per cent. This can be up to 6 times as much appreciation as the typical 5 to 10 per cent experienced when buying after construction has begun. Additionally, a buying-off plan allows the buyer to spread out payments for their property over a period of time.
What does the process look like?
The stage of development where buying off-plan deals is offered is called “pre-launch”. The developer is still in the process of confirming plans, obtaining permits, and performing an Environmental Impact Assessment. However, even at this early stage, the developer requires money in order to move the project forward. Because buying at this point involves a long wait for the property to be completed, and more risk than at a later stage, they typically offer incentives to early buyers. In addition to price breaks, the developer may offer guaranteed rental returns, financing options, opportunities to customize the early units, and other perks.
Once the contract is signed, you must make a deposit. The amount of the deposit may be as much as 50 per cent of the agreed-upon price, however, it may also be a great deal less. In addition, there are some boreys that do not require any initial deposit at all. This demonstrates that the prices and processes will differ from one developer to another. From this point, there is a definite degree of flux, and plans may end up being changed, sometimes without the buyer's knowledge. Often payments will tie in with the construction progress, i.e. the percentage of payment due will align with the percentage of the project that is completed.
Stay tuned for Why buy property off-plan in Cambodia? part 2 next week.
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