OFF-PLAN REAL ESTATE: 5 IMPORTANT THINGS TO NOTE BEFORE BUYINGOluwakemi Adeyemo
In recent times, buying properties off-plan have become one of the most profitable options for real estate investors. A cheaper option for homebuyers in Nigeria. Although, it takes a lot of gut and effort to buy properties off-plan. It also takes a lot of courage and can-do for a developer to embark on the journey of creating homes from thin air.
Off-plan property purchase means that you are buying into the concept and design of the development with hopes that the project execution process will be a favourable one and the end product matches your expectation. You are also trusting that the developer has the values declared or portrayed to deliver on agreed deliverables.
Building a house that can stand the test of time requires great precision and accuracy from top-notch professionals who can be held accountable. The dearth of such professionals and the rigours of building a house from scratch can sometimes be a tall order for an individual. For homebuyers who do not wish to go through the rigours of building from scratch, the off-plan property becomes a preferred option. It offers the opportunity for some personalization while taking away the stress of building by yourself.
One of the perks of subscribing to an off-plan property means that you are buying below the open market rate at which already finished units will be sold for. Buying at a lower rate compared to what a finished property will sell for does not mean that substandard materials will be used. It does not also mean that the developer will cut corners.
Since multiple units are developed at the same time, some major costs are spread across the multiple units. This cost spread drives down the cost of a unit by some percentage in comparison to building a single unit.
Off-plan buildings balance the emotional cost that personally built homes come with. An individual tends to over-personalize their homes, even the supporting structure. This personalization though not bad usually affects the value the asset can generate in future. Because the would-be buyer may prefer something different. And such a buyer will factor in what it cost to re-purpose or personalize the building.
Are all off-plan projects worth your money and time? Of course not. So how do you as an investor or home buyer decide on which developer’s project to chose for your off-plan purchase or investment? Here are five basic yet critical areas to look into when considering an off-plan property purchase.
- Ownership rights on the land
Most off-plan projects are an offshoot of a joint venture partnership between two or several entities. Each of these entities usually contributes some form of equity to the project. A major contribution is landed property. This means that in an off-plan arrangement, the developer may not hold rights to the land on which the building will be sitting. You should therefore ask who holds the right to the land and also ensure the titleholder is in agreement to the development.
- Mistakes, track record, lessons, challenges and motivations
Delivering quality and affordable homes in cities is not a walk in the park. A developer needs to find willing partners with similar values, secure funds, find the best land, get permits/approvals to mention but a few. These activities can sometimes be daunting.
Some developers have been in the game for some time while there are new entrants. A way to identify an off-plan project to buy is to engage the drivers of the project by asking questions about their motivations, mistakes, lessons, track record and challenges. This helps to test for improvement and reliability in a developer’s process.
- Expectations as a buyer
A major challenge with off-plan developments is that of the balance between the buyer’s expectations and what the developer can deliver. Sometimes, it is the buyer’s expectation versus what the developer promised to deliver.
So when considering an off-plan property, have documented discussions around your expectations. Ensure you understand what the developer will deliver to you. Here, you may need a professional on your side during such discussions.
There are uncertainties in the business world. Uncertainties from things within and outside the developer’s control. For instance, the time required to process approvals can be extended. A developer may not have control over that. Now in a case where there is a building or unit malfunction, a developer can fix that.
Since the off-plan property option is a case of what is ordered versus what is delivered, you should ask for some comfort or guarantees.
Your relationship with an off-plan property developer goes on for a few months. Sometimes it extends into years. You want to enjoy this journey as much as can be possible. A way to guarantee a mutually beneficial and seamless relationship is to ask about a developer’s process. You can ask about the building process, communication process, conflict resolution process etc.
An open developer’s process flow aids compliance, improvement, helps to measure delivery and satisfaction.