For those who haven’t invested before, you may be wondering what off-plan property is? This is essentially buying a property off a floor plan, prior to it being built. These kind of properties are either starting construction or are in the construction process, depending on where you are in your purchase journey.
There’s an increased skepticism about off-plan property particularly in Kenya, and this can be due to a variety of factors ranging from developer track records to the history and experiences of off-plan buyers. So what factors should you be considering when deciding to purchase off-plan?
Who are the teams and are they credible?
The first facet of reassurance during your real estate journey lies in the hands of the developer and collaborators around the project. The people who are handling the project should be your key indicators as to whether or not you should purchase their development. It’s essential to look at the background of the property developer to see what they’ve done in the past and see whether there is success attached to it.
You may be wondering, what if this is a first time developer and you have no track record to see? In a situation like this, make sure to look at the team surrounding the developer – who are their consultants, architects, engineers, surveyors, interior designs and project managers? How much expertise do they have in their respective fields? Do they have a good track record? Do they have the correct certification and approvals?
It’s certainly not uncommon for first time property developers to exceed expectations and prove to be successful in their endeavors, and this is because they are surrounded by teams that aid their reduced experience. This type of property developer would be less hands-on than the more astute one, but this isn’t necessarily a key indicator of success as the teams they appoint may be well experienced and versatile with real estate.
What do the structural bones of the building look like?
A common misconception in off-plan property is the prices reflecting the quality of the show house and square footage only. While it’s crucial to evaluate the kind of finishes the property will entail for long term durability and overall investment value of the project, it’s equally as important, if not more, to understand the quality that lies behind the structural bones of the building.
You don’t want to buy into a product that will, in a short span of time, lead to management disruptions because the structural integrity of the building was compromised to cut costs, inevitably resulting in decreasing the value of your investment. Things to look out for would be the quality of materials they use ranging from their electrical wiring to their plumbing pipes. You want to make sure that you look at Grade A buildings which would usually mean their infrastructure is of a very high standard.
Are they reaching their development milestones?
It’s not unheard of for all milestones not being met in the exact timeframe provided due to construction being delayed. As a general rule of thumb, we allow approximately 6 months’ delay. Of course there are some exceptions to the rule, like in an instance when Covid-19 came into the picture. Worldwide supply chains got disrupted for many developments, cost of materials increased significantly, shipments were severely delayed and many other factors inevitably resulting in construction delays.
However, as a buyer you should research and see whether their overall project timelines are on track and going at the pace they promised to see whether the project is going as planned. This would be a sufficient indicator to inform you whether the developer is credible as well as give you an indication of the demand activity of the project.
Remember, developers cannot go ahead with construction if they do not have the financial backing for it. An increase in demand will usually indicate that the project is going steadily. You should ensure getting construction updates from your trusted property advisor so that you can visually see measurables attached to the project.
Does the sale agreement work for you?
The sale agreement is a binding document therefore it is imperative to go through it thoroughly with your lawyer to ensure that you legally protected and that you understand fully the terms of the contract to avoid any misunderstandings at a later stage. If there are any further clarifications you need, your lawyer would necessitate conversations with the developer’s lawyer to address this. Make sure your lawyer is well experienced in this field so that their due diligence is accurate.
It is also important to have realistic expectations and be well versed on what market standard sale agreements are like so that you don’t unnecessarily miss out on good opportunities for yourself over a dispute about sale agreement terms that you’d also find elsewhere.
Overall…
Off-plan developments give buyers a great opportunity to start their journey in real estate. If this is a prospect that excites you, jump onto the bandwagon and get your research going diligently. Be sure to consult with experts so that you can make good informed decisions that work towards building and enhancing your wealth.