Cons on off-plan Properties
In Kenya, hundreds of people are now looking forward to investing in off-plan properties more than ever. It’s sad to see that only a few of these people get to profit or even move into these properties. We have all heard of stories where off-plan developers run into hiding with clients’ money. Nevertheless, you will find Kenyans still investing in these properties, being driven by the affordable prices provided. But is it worth it?
Off-plan real estate investments are where investors and home buyers place their money on a property that is yet to be completed but for a lower price. These people are promised an increase in the value of property hence if you are investing, you will have more profit. Yes, this could be true but for some, these are nothing but lies to get you in the trap. It’s good to note that off-plan investment profits are never guaranteed. Let no one lie to you.
These kinds of properties have won the hearts of many investors and homebuyers due to their flexible payment plans that also come with cheap prices. Also, one can make adjustments in the house design where they feel it’s necessary. For example, a person may want to have a closed kitchen type while the initial plan of the developers was to have an open kitchen plan in all units. This is an added advantage since if you were to adjust after its completion, you would be required to pay additional charges.
While off-plan properties have many advantages, they have risks that you may want to consider before investing. The following are some of the risks that you should be aware of:
1. Different development from the expectations
As an off-plan buyer, there will be a show house which should be a duplicate of your future house. As exciting as the show house may seem, the final look may not look as such. This is the reality of most homebuyers who thought their homes would look like that of the show house.
To avoid this, you need to see what exactly is going on during construction. Take keen on every detail of the development, even the materials being used. Check the kitchen cabinets, paint quality, door fixtures, light fixtures, floor type, room size and any other detail.
Also, before signing the dotted lines, check whether you can visit the site during its construction. also, check if you shall be informed of the changes being made during the construction. Make sure that all these issues are addressed before signing the sale agreement.
2. The risk to lose money
Off-plan buyers pay a deposit and then settle the rest of the money in instalments. This means that you will continue paying for the uncompleted project for months or even years, not knowing if the project will be completed. Even though every property has its risks, the chances of an off-plan property not being completed are very high. You might end up losing a lot of money for nothing
Before buying an off-plan property, request for the developer to provide the names of projects that he has completed. You may go ahead and try to get information from homeowners in those projects. Ask them about their experience with the developer and cautions.
3. Unpredictable market trends
One of the biggest risks when buying off-plan properties is the uncertainties in the market. Just as the value of the property can increase, it has equal chances for the value to decrease. if the value increases, then congratulations, but if the value goes down or decreases then you will have to live with it.
Always check on the number of developments around the location you want to invest. Changes to decrease in the value of the property will always be caused by supply/demand. Are there many projects upcoming in the location? And if so, will the value increase or decrease? What is the demand for properties within the area? These are some of the questions you need you to ask yourself before making any commitment.
4. Completion date
Buying off-plan property is characterised by having to wait for at least a year or so before you can move in. This is typically advantageous for the developer to have enough time to acquire needed capital to continue with the project. But what happens when the developer fails to deliver the houses by the promised time? This could be a red flag.
It’s common for most off-plan properties to have completion dates but then they are rarely met. Most of these projects surpass the expected duration of construction by even months. This is where you seek legal advice. You even have a right to terminate the contract if it takes longer than estimated.
5. Additional charges
Developers often hide some charges that may affect your budget in future.some of these could add up to 10% of the selling price. Beyond paying the deposit and applying for the mortgage, there are other costs that you may want to confirm with your developer. These charges include:
- Stamp duty fee
- Survey fee
- Council tax
- Buildings and contents insurance
- Service charge
Before signing the contract, make sure that the developer has made clear the charges that you will be required to make. This will help you make sure you are still working within your budget.
All advantages can only be enjoyed if the developer delivers the houses. With genuine and trusted companies like Commercial Property Kenya, you don’t have to worry about the above risks. We promise what we can deliver.