There’s always a risk in buying something you can’t see. Buying off-plan means you are purchasing your new home in a sectional title complex or cluster home scheme before it is built and will be depending on the developer and builder to complete your home properly and timeously.
This usually happens when you have been attracted to a new development where one unit has been constructed as an example or where no units have been constructed at all. Paul Stevens, CEO of Just Property, has provided the following questions and answers to assist anyone planning on purchasing off-plan.
Why buy something that isn’t built?
When buying from a developer you don’t pay transfer fees and the most important financial incentive for buying from developer is that bank will finance total cost of house, including VAT’s and all fees.
Buying from developer means you are protected by the Consumer Protection Act, which does not apply when buying from private seller. The act gives consumers more protection and imposes greater responsibility on developers to look after their interests, specifically because buyers cannot see the finished product before signing the contract You can also influence the final product and variations in price to suit your needs, eg: Choosing the colour of the carpets, curtains, tiles etc.
Can I be sure of what I’m buying?
If you are not monitoring the progress of your unit closely you can find the layout and size have been altered along with fittings and finishes. Check the contract carefully and make sure that the specifications of fixtures and finishes are listed in detail and not just referred to in its general clause
The big difference between buying sectional title apartment and freehold unit in a development is that the entire sectional title block must be completed before the buyers pay for their units, and contractors with reputable developers and builders will specify that any discrepancies between the promised and the completed sizes should not exceed five to 10 percent.
What if the property has been badly built?
As a consumer you have the right to
- Within 3 months, instruct rectify any non compliance and deviations from the original plans
- Within 12 months instruct the builder to repair roof leaks attributable to workmanship, design materials etc
- Within five years instruct the builder to rectify major structural defects caused by non-compliance with technical building standards
Can I sell before taking transfer?
It’s possible to sell your property before taking transfer but proceed with caution. If you are buying specifically to sell to a profit before transfer you may be disappointed. It is not uncommon for the deed of sale to stipulate that buyers cannot sell their units before transfer without the written consent of the developer. Properties in the later phase of development tend to be marketed at significantly higher prices , so developers will be trying to sell their more expensive plots while buyers in the first phase are undercutting them.
How can I ensure tenants will look after my new property?
You can never know how tenants will treat your property so it could be a good idea to take out landlord insurance. This insurance covers you for potential loss of rent due to tenants defaulting on rent, causing malicious or accidental damage and public liability.
The Benefits of Buying Off-Plan
Like any major investment, buying real estate off-plan can be high risk if insufficient research has taken place. But according to Paul Stevens of Just Property, there are also perks to buying property yet to be built, which he lists as follows.
1. Big Transfer duty savings
One of the well-known and biggest reasons for buying off-the- plan property is the potential for huge savings on transfer duty, which can put a huge dent in your pocket, especially when you’re a first time buyer.
2. Depreciation benefits
If you’re buying off-plan as an investment and plan to lease your new home to renters, you may be eligible for large tax deductions. Get a full depreciation schedule from a quantity surveyor once your property settles. This will assist at tax time when claiming deductions for your new asset’s brand new fittings and fixtures.
3. Repair cost savings
It goes without saying that a brand new home – if well built – will not need the ongoing maintenance that an older property often needs.
4. Lower power bills
Your off-plan home should be fitted with some of the most power-saving appliances and gas/water/electricity systems on the market, which is a boon for owner occupants and future tenants alike.
5. Potential capital gains
Buying off-plan allows you to buy at today’s price. In a rising market, this can mean you own a property worth more than you paid for it by the time the deal settles after construction.
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