The popularity of off-plan deals: where and why?

Understanding the concept of off-plan

When it comes to overseas real estate, many people come across the term “off-plan”. This term is used to refer to the purchase of housing at the earliest stages - from obtaining building permits to the completion of facilities. However, it should be noted that buying on the primary market does not always mean off-plan, as the primary market also includes finished apartments and new buildings at various stages of construction.

When a developer completes a project, as a rule, it has no spare options for sale, as most apartments are already sold out during the construction phase. This is especially the case if the developer has not left some properties for possible sale at higher prices later on. It is for this reason that off-plan methods have become very popular among buyers of new buildings.

Popularity of off-plan deals in different countries

In terms of countries where the practice is widespread, it should be noted that in some regions it is becoming more relevant, while in others it is less so. Important factors contributing to the spread of off-plan transactions include:

• high interest in residential real estate;
• availability of vacant land for development;
• adequate regulation by the state;
• customer confidence in market participants;
• transparency and dynamic development of the system.

The United Arab Emirates is a great example of a country where off-plan transactions are very common; to date, this type of transaction is approx.41%of the total number of properties purchased.

Primary market development in other countries

Analyzing the situation, we can not ignore such countries as Spain, Turkey and Thailand, where the primary housing market is actively developing. In these countries, the purchase of real estate at the construction stage provides buyers with many advantages, including:

• interest-free installment plans;
• significant difference in the cost per square meter between the cost at the construction stage and the price of the finished house.

Cyprus is also renowned for its high level of off-plan transactions, where small residential developments are most commonly found.

Caution when buying in foreign countries

On the other hand, in countries such as Georgia and Egypt, one can observe a variety of offers on the primary market. However, here potential buyers need to be careful when choosing developers and concluding contracts. These countries require special attention to the reliability and transparency of the companies with which they plan to cooperate in order to prevent possible problems in the future.

Results

To summarize, it should be said that off-plan transactions prevail in states with developed real estate markets. The main factors of success of such transactions are:

• process transparency;
• control by state structures;
• a high degree of trust between market participants.

Before making a final decision to buy an apartment at the construction stage, it is recommended to thoroughly analyze the market, familiarize yourself with the offers and working conditions of various developers to make your investment as profitable and safe as possible.

Control of developers in Egypt

In Egypt, the government is taking important steps to ensure greater control over real estate developers. In particular, it is considering the creation of a state-of-the-art digital platform that will showcase all relevant real estate projects.

The situation in the real estate market in Bulgaria

In Bulgaria, from the late 2000s to the early 2010s, there was a significant increase in sales of apartments under construction. However, the situation has changed dramatically in the last eight years. After 2014, the primary housing market experienced a marked decline. Between 2018 and 2019, construction and investment companies completed projects started earlier, but with the onset of the pandemic, most construction work came to a halt.

At present, new residential complexes are appearing in large settlements, but the market is still dominated by offers from private owners. The situation is very similar to that in Montenegro and Croatia, where there are also not enough new construction projects.

Interest in apartments in France and Germany

In France and Germany, there is an increased interest in apartments located in new buildings. The average price of such properties is at10-15%higher than in the secondary market, which is explained by the reduction of risks in such transactions and obvious advantages.

Marina Vasilyeva, head of the agency “Advex.Real Estate”, emphasizes:

“Modern buildings are designed with the latest sustainability and energy efficiency standards in mind, allowing new homeowners to save significantly on operating costs.”

Modern infrastructure facilities are under construction in the immediate vicinity of the residential complexes:

• school
• daycare centers;
• stores;
• parking lots.

This adds an extra plus point for buyers. In addition, there are tax incentives such as:

• A temporary property tax exemption for a period of two years;
• reduction of value added tax to 5.5-7%.

Installment or credit terms also make the buying process more attractive.

Buying a home in Turkey

As for Turkey, the real estate market here actively uses the scheme of selling housing at the construction stage. As soon as a developer receives permission to build a new residential complex, he immediately starts selling both through his offices and through real estate agencies with which he has signed contracts.

At the time of launch of sales, floor plans, price lists and 3D renderings of the future building have already been prepared, as Ksenia Balji, executive director of Liga Real Estate, points out.

Reasons for the popularity of buying on-stage construction in Turkey

Buying property under construction in Turkey is popular for several reasons:

• Minimum prices. This allows buyers to purchase an apartment at a low cost. For smaller projects, where construction takes one to one and a half years, the cost of housing usually triples during this time.
• Price dynamics. If the project is two to three years in duration, the price can change up to four times from announcement to completion.
• Interest-free installment plan. An attractive opportunity that developers offer before the construction process is completed. The down payment is usually between 20 and 30% of the total transaction amount.

This makes the process more accessible to a wider audience. This creates favorable conditions for those looking for favorable housing options and investment opportunities in future projects.

Advantages of installment payments when buying real estate

The ability to make payments for the purchase of real estate in installments, whether monthly or quarterly, offers the buyer a comfortable solution for purchasing a home. This creates an environment in which the client, who is not burdened with all financial obligations at once, can see the price of his future apartment rise.

Flexibility to buy during the construction phase

One of the main advantages of buying an apartment at the construction stage is the opportunity to negotiate with the developer about making changes to the project. However, it is important to remember that such changes should not affect the load-bearing structures of the building. Moreover, buyers have the opportunity to choose their own finishing materials and the decision on where the warm floor will be installed, and where not. All these details should be reflected in detail in the sales contract.

Disadvantages of a deal at the off-plan stage

Nevertheless, there are certain risks that should be taken into account before deciding on such a deal. The construction completion process may take from one to three years, which raises certain doubts among potential buyers. There is a possibility of delay in getting the keys to the new housing, as well as possible discrepancies between the original promises of the developer and the actual quality of work performed. In Turkey, such cases are rare, but the chances of encountering an unreliable construction company are still present.

Risks associated with project compliance

Serious problems can arise if the developer deviates from the design standards agreed with the local authorities. For example, if the built object does not comply with the agreed plan, it will not be able to obtain an official commissioning certificate, which is called “iskan”. Even if the developer connects the necessary communications, the use of such housing will be considered illegal, and this may subsequently lead to the demolition of the building.

Important points when buying real estate

• Minimum deviationsfrom the approved project may prevent you from obtaining a claim.
• Construction companies try to avoid situations where code violations occur.

Expert Ksenia Balji notes that in most cases construction firms control the quality of work performed.

Construction delays

As for possible delays on construction sites, this is quite rare in Turkey, especially if the project is carried out by a reliable construction firm. Contracts with such companies often specify penalties, which implies payment of compensation to the buyer for each month of delay in the form of rent at market rates (this can range from $300 to $500, based on a particular residential complex).

However, it is important to bear in mind that if the delay is due to reasons unrelated to the developer, such as changes in the town planning or works on a neighboring plot, the contractor is not liable for such cases.

Recommendations before making a purchase

Thus, before buying real estate at the construction stage, it is worthwhile to study well all the possible risks, so as not to face trouble later.

Not uncommon cases of construction in progress

In the unfinished construction industry, cases of this nature are very rare. These situations most often concern small developers who sometimes leave their clients in a difficult position. Potential buyers often look for such properties themselves in an effort to save money.

However, in reality, it is extremely difficult to get your money back, as the contracts are often signed with irregularities and do not have due legal force.

Problems in the market of new buildings

It is important to emphasize that problems in the new construction market in Turkey are quite rare. They can be prevented by avoiding cooperation with unreliable contractors. In this context, the control of public authorities plays a key role.

The role of the state inspectorate

Municipal authorities issue building permits only after developers meet certain requirements. One of the main conditions is that the land plot must be fully owned without any encumbrances. The project is also subject to a thorough review for compliance with all necessary regulations, such as:

• building level
• roadway distance

Protection of foreigners' investments

Foreign investors in Turkey can be confident in the protection of their investments, as all financial transactions are subject to mandatory documentation. This requires a properly executed sale and purchase agreement that specifies all parties:

• developer with its registered office
• real estateagency, if it is involved in the transaction
• customer data

Funds transfer procedure

If you are going to transfer funds to the seller's account, it is advisable to obtain a so-called “decon” from the bank. When depositing cash, the buyer receives a signed and stamped receipt, which is also a receipt of debt.

This is a very important document that allows the client to claim a refund if the deal is terminated through the fault of the developer. In this case, both individual and legal entities - the founders of the company - are liable.

Choosing accommodation in Turkey

For those who are planning to buy a home in Turkey and do not have the full amount, there is an option to consider an off-plan option. This can be a profitable solution.

If you have the necessary funds, it is worth paying attention to offers from owners, as such options are usually cheaper. There are plenty of alternatives on the market, which will allow you to set a reasonable discount.

Recommendations for selection

Specialists recommend ready-made real estate also to families planning to move to Turkey. They can be sure that such offers are often quite favorable and avoid many problems.

Moreover, buying a ready-made home gives you the opportunity to start a new life immediately, without having to wait for the construction process to be completed. This solution can be ideal for those who value time and want a hassle-free way of life in a new country.

Conclusion

Thus, choosing ready-made real estate remains the best option for a quick and safe entry into Turkish society.

Conclusion of the transaction and execution of documents

The conclusion of a real estate purchase deal, the execution of an “ikamet” (official document certifying the right to property) and the submission of documents for a residence permit should be done in those regions where foreigners are allowed to reside.

Legislative features in Thailand

When considering real estate in Thailand, it is important to keep in mind that the legislation gives developers the legal right to extend the completion date by up to one year from the date specified in the purchase agreement. For example, if the contract states that the project is to be completed on October 1, 2022, the developer has the option to complete the work and hand over the keys to the buyer by October 1, 2023. This information is usually fixed in the contract, but even in the absence of the relevant clause, developers remain within the legal provisions that allow them to delay the completion of construction, using the time period provided to them at their discretion.

Buyers' rights

During the said year, buyers have no opportunity to make claims against the construction company. In situations where the developer fails to complete the work within the allotted additional period, it often offers buyers various bonuses or discounts as compensation for the delay. If the developer completely avoids fulfilling his obligations, the buyer has the right to file a statement of claim in court. In such a case, the court may order the developer to return the entire amount paid by the buyer for the property, and impose a fine in the amount of7.5%per annum on the amount that the developer has used since the time it ceased to fulfill its obligations.

Strict adherence to specifications

The construction of new housing requires strict adherence to all specifications and specifications stipulated in the contract. In particular, any deviations in the area of the apartment must not exceed5%either upward or downward. If the developer does not comply with this restriction, the buyer has the right to cancel the contract and request compensation.

Responsibilities of real estate developers

In addition, developers in Thailand are required to fulfill all promises made in their promotional materials. Therefore, professionals recommend that you keep advertising brochures, photos and videos that show details of finishes, infrastructure of the project, types of landscaping, number of swimming pools and other important characteristics. In case of non-compliance with the standards stated in the advertisement, the buyer has the right to refuse to purchase the apartment and get his money back with a penalty.

Investment strategies

Experts emphasize that investments in real estate at the off-plan stage may be of interest to those who plan to receive rental income or consider real estate as an investment instrument. However, if the goal is not to gain profit from the subsequent sale, it is more advisable to pay attention to apartments in new buildings closer to the stage of their completion.

Buying real estate in the UAE

As for the United Arab Emirates, the purchase of real estate at the off-plan stage is characterized by high flexibility in terms of payments. As explained by the Vice President of H&S Real Estate, Mr. Emad Haq, developers offer interest-free installments that last until the completion of construction works, with a maximum term of up to10 years. The down payment is generally from10% to 20%of the total cost of the facility.

Attracting clients by real estate developers

Some developers use a variety of methods to attract new customers, including offers such as exemption from registration procedures with the Dubai Land Department or providing free services for a certain period of time.

Investment during the construction phase

Investing in real estate at the initial stage of construction also opens up additional opportunities to increase income due to the growth of the market value of objects. That is, there is an opportunity to resell apartments at a profit, sometimes even before the completion of their construction. The level of demand for residential real estate in Dubai is such that with the release of new residential complexes with attractive features from well-known developers, there is a real rush among buyers.

In some cases, the most sought-after apartments in new buildings are sold out in just a matter of days, and sometimes even hours, after the start of sales.

Minimizing risks for buyers

This active interest in the primary housing market is due to the minimal risks for buyers. The government closely monitors compliance in this area through such institutions as the Dubai Land Department (DLD) and the Real Estate Regulatory Agency (RERA).

Rules for developers

In the case of unfinished construction, the legislation of the United Arab Emirates establishes strict rules for developers. All funds invested by investors are kept in a special escrow account opened for a specific project.

The developer is required to submit detailed reports to the Dubai Land Department at each stage of work, and access to the finances of the next stage is only granted after the previous stage has been completed. If at any point the developer is unable to complete the project, the government will take steps to organize a tender process whereby the funds are transferred to another company to complete the construction.

Construction delays and cancellations

In the event of a delay in completion or termination of construction, developers in Dubai have the legal right to extend the completion date for up to 12 months from the date of expected completion. This means that a delay by the developer on a property financed by you for a year cannot be grounds for a claim.

If the construction work is suspended or canceled, the land department assigns the project an appropriate status, which can be checked on Dubai's official portal.

Investment recovery

According to Law No. 8 of 2007,the developer is obliged to return the invested fundsusing money from a guaranteed bank account. In case of disagreement between the parties, the investor has the right to apply to the court to recover his investment.

According to Legislative Act No. 19, which was approved in 2020 and amends Article 11 of Law No. 13 of 2008, which regulates the process of temporary registration of real estate in Dubai, developers of projects that have failed to start construction for various reasons are obliged to refund money to their clients.

Dubai provides inspections to look for construction defects that may jeopardize both your interest and investment. These are critical to assessing a residential property before a handover certificate or defects document is signed.

Objectives of the inspection

The main objective of such an inspection is to verify that all obligations of the builder to hand over the property are fulfilled, which must comply with the required construction and operational standards. If the builder fails to fulfill its obligations, the owner is fully entitled to demand compensation or free correction of the identified defects within a reasonable period of time.

Usually, if a buyer has no time constraints, he considers apartments at the planning stage, as housing in new buildings under construction is often 30% cheaper than ready-to-move-in properties. But for people who plan to move to Dubai quickly and do not want to wait, such new buildings may not be relevant, as construction work can last from 2.5 to 4 years, as expert Emad Haq explains.

Changes on the real estate market in Bulgaria

Bulgaria's real estate market has seen marked changes in recent years. The construction trends that were seen before 2014-2016 have slowed down considerably, and during the two years of the pandemic there was hardly any work. According to Daria Borzova, managing director of Oazis Real Estate, new projects are being launched in cities such as Burgas and Varna, but developers can no longer offer such attractive three-year installment terms as they used to.

The construction cycle in Bulgaria is rather short and usually takes from 1.5 to 2 years, while the prices of apartments remain stable - the increase is only 3-5%. Therefore, the secondary housing market is significantly dominant today.

Buying real estate: tips and risks

Yulia Titova, an expert on foreignreal estate of the company Rentsale, notes that “sometimes it is much more profitable to buy a quality apartment from the owner than to invest in a new building”. Another factor that makes buyers hesitate is the risks associated with buying real estate.

• Problems with construction quality- can occur with poor quality materials and workmanship.
• Failure of contractors to meet deadlines- risk of delays in commissioning of the facility.
• Legal uncertainties- there may be difficulties with the title deeds.
• developer bankruptcy- a tragic scenario where the project could be frozen.

Thorough research and preparation help minimize these risks. Therefore, in order to successfully purchase real estate in Dubai or Bulgaria, it is important to carefully analyze the market and make a choice based on your needs and visions of the future.

Conclusion

To conclude this article on the real estate market and the features of the off-plan concept, I would like to emphasize how important it is to choose the right strategy when investing in overseas real estate. As we have discussed, the off-plan is an attractive option for many buyers, allowing them to save money and purchase a home at a lower price. The symbiosis of growing demand for housing and favorable terms offered by developers creates unique opportunities in international markets.

Diversity of approaches

Having studied different countries, we see that approaches to off-plan transactions vary considerably. ВUnited Arab Emirates,SpainandTurkeySuch transactions are commonplace, generating steady demand, while in countries with less developed markets such asBulgariaandMontenegroThe market can face instability and constraints. This underscores the importance of careful selection of developers and understanding the adverse factors that can affect the success of a transaction.

Key aspects

• Market transparency
• Buyer advocacy
• State regulation

I hope that my article has helped you better understand what an off-plan is, its benefits, as well as the risks that can accompany such investments. As we can see, market transparency, buyer protection and government regulation play a key role in the popularity of off-plan deals. Therefore, it is important to consider all these factors and follow the advice of professionals before making decisions about overseas investments. I hope the arc of information has been helpful and inspiring for you in planning your next steps in buying real estate abroad.