Pros and cons of buying an apartment off-plan in different countries

Turkey

"As soon as the developer has received permission to build a new complex, he announces the start of sales, both through his office and through agencies with which relevant agreements have been concluded. By this time, floor plans, price lists and renderings of 3D images of the future house from different angles have already been prepared," says the executive director Liga Real Estate Ksenia Baldzhi.

Buying an off-plan home in Turkey is common, because, firstly, this way you can buy an apartment at a minimum cost. If the project is small and the construction is carried out 1-1.5 years, then during this period prices, as a rule, increase three times. If the project lasts 2-2.5 years, then the price list may change four times during the time from the moment of the announcement to the commissioning of the house.

Secondly, buyers are attracted by interest-free installments, which the developer provides until the end of construction. The initial payment is usually 20-30%. The rest can be paid monthly or quarterly. Thus, the client, having not yet transferred the entire amount, sees how the price of his apartment is growing.

Thirdly, when purchasing an off-plan object, it is permissible to talk with the developer about making changes to the layout project, naturally not affecting the load-bearing walls, as well as participate in the selection of finishing materials, additional options, for example, in which rooms you need to install underfloor heating, and in which not. All these details can be reflected in the contract of sale.

The disadvantages of buying real estate off-plan, of course, include the need to wait for the completion of construction. In Turkey, the construction period of the complex ranges from 1 to 3 years.

Another disadvantage is the usual buyer's fears in such transactions related to the delay in the delivery of the house, the possible discrepancy between what the developer promised initially and the result obtained, as well as poor-quality work. In Turkey, these risks are small, but, nevertheless, you can run into an unscrupulous construction company.

The result does not match the project

Serious problems may arise if the developer erected the object, departing from the project that he initially agreed with the mayor's office. Such a building does not receive an act of commissioning ("iskan"), and even if the developer manages to bring communications to the building, their use by households will be illegal. Not to mention the fact that the house can be demolished at any time.

"It is worth noting that even the slightest deviations from the agreed project will not allow the developer to get iskan. Therefore, as a rule, companies try to prevent this and monitor the quality of work," explains Ksenia Baldzhi.

Delay in construction dates

Construction delays in Turkey are rare. If we are talking about a bona fide construction company, then the contract with it always prescribes penalties in the form of rent at an average market rate (approximately $300-$500, depending on the residential complex), which the developer pays to the buyer for each month of delay. Note that if the construction is not completed on time through no fault of the developer, then he is not financially responsible. For example, this happens when the authorities change the marking of sites in the urban planning plan or conduct some work near the site, and this prevents, say, the passage of construction equipment.

Construction in progress

Stories with unfinished construction are extremely, extremely rare. These may be the objects of some small developers. Buyers find them themselves in order to save money. It can be problematic to return your funds in such completely egregious situations, since the contract in such a scenario is most likely drawn up and signed incorrectly and has no legal force.

We emphasize that problematic situations in the market of new buildings in Turkey are quite rare, and they can be easily avoided if you do not deal with dubious developers.

State control over developers

A permit for the construction of a house is issued by the mayor's office, subject to the company's compliance with certain requirements. One of them is that the developer is obliged to fully buy the land for construction, while the site should not be under encumbrances. In addition, the project is checked for compliance with all standards, for example, by the number of floors, distance from the road, and so on.

In Turkey, the state protects payments made by foreigners, so all payments must be confirmed by a document. Firstly, a properly executed purchase and sale agreement is required as a basis, in which all parties to the transaction are indicated: the developer with his legal address, a real estate agency, ifit is involved, as well as the data of the client himself. If the buyer transfers money to the seller's account, then it is necessary to get a "discount" from the bank.

When depositing funds in cash, the buyer receives a receipt, which must be signed and stamped by the seller, that is, a real estate agency or a construction company. The receipt is also a promissory note, with which the client can demand a refund in case of termination of the contract due to the fault of the company. Moreover, the financial responsibility is borne not only by the legal entity, but also by the individual owners of the company.

Those who are planning to buy an apartment in Turkey and at the same time do not have the entire amount yet, of course, it is advantageous to stay on one of the off-plan options. If you have the means, then it is worth considering housing from the owners - it will be cheaper, since there are enough offers on the market, and sellers offer a discount.

Experts also advise buying ready-made real estate for families who are planning to move to Turkey. It is advisable to conclude a deal, get an "ikamet" (certificate of ownership) and apply for a residence permit in those areas that are available for foreigners to live. It is not worth delaying, since there is no guarantee that "open" areas for foreigners will not close. 

In the housing market of the Thai resorts of Pattaya and Phuket, the main attention of tourists and investors is focused on these regions, approximately 70% of transactions are concluded for off-plan objects.

One of the main advantages, as in Turkey, is an interest-free installment plan for the construction period. "People can sign a contract, deposit 30% and gradually pay the remaining amount according to an individual schedule agreed with the developer," says the head of the company «Gallery of real estate in Pattaya and Phuket» Olga Barteneva.

The second plus, according to the expert, is the opportunity to buy an apartment cheaper. At the initial stage, the so-called pre-sale price is valid. From the start of sales to the completion of construction, the cost of apartments can increase by 30-40%, which gives investors the opportunity to earn. Moreover, it is possible to resell the apartment, after waiting for the price increase for it, and at an intermediate stage before the completion of the work.

Another reason for the popularity of off-plan deals is that in this way you can buy better quality real estate. "New, modern houses cannot compare with the housing stock of, say, 10 years ago. Moreover, every year developers, competing with each other, offer projects more and more interesting," Olga Barteneva continues.

The acquisition of real estate at the construction stage always carries certain risks. To avoid them, it is important to pay attention to details.

Legal issues

When considering an object, you should make sure that the land plot belongs to the developer company. In Thailand, the right to everything that is built on a plot of land belongs directly to the owner of this plot. It is necessary that information about the owner of the land or about the relationship between the owner and the developer be specified in the contract for the purchase of an apartment.

It should also be checked whether such a company exists in principle, whether there is a permit for the construction of the facility, whether there is an environmental certificate.

Delay in construction dates

Situations with delayed construction dates or, moreover, with unfinished objects are not common in Thailand. It should be noted that in accordance with Thai law, there is a legal delay for developers equal to 12 months from the date specified in the contract of sale. That is, if the contract has a completion date of October 1, 2022, then the developer has the right to complete the work and hand over the house before October 1, 2023. As a rule, developers specify this clause in contracts. But, even if it is not included in the contract, the company still has the right to delay construction legally and use additional time at its discretion.

During these 12 months, the buyer has no right to make any claims to the developer. If the company does not meet this additional period, it often offers the client any preferences to mitigate the situation. The buyer has the right to apply to the court, which will charge the seller the full amount plus a penalty of 7.5% per annum for the use of funds for the period starting from the moment when the developer ceased to fulfill its obligations.

Project inconsistency

In a new building, everything must clearly comply with the specification that was in the contract. So, it is forbidden to retreat by more than 5% in any direction in the area of the apartment. If the company has allowed this, the buyer has the right to terminate the contract and collect a penalty.

In addition, the developer in Thailand is obliged to implement everything that he initially promised in the advertising of the project. For this reason, lawyers recommend saving advertising booklets, photo and video materials, which show what kind of decoration was conceived, what kind of equipment of common areas, the type of green spaces, how many swimming pools and so on. If the developer has retreated from his plans, the client has the right not to accept the apartment and return his money together with the penalty.

Experts recommend off-plan real estate to those who purchase for the purpose of investing or earning from subsequent rental. If the task of making a profit from the price difference is not worth it, it makes sense to choose an apartment in a new building, but closer to the date of commissioning.

The Bulgarian market has changed in recent years, as we have already said. Active construction, as before 2014-2016, is no longer underway, and during the two years of the pandemic, it practically stopped altogether. "Now in cities such as Burgas, Varna, new projects are emerging, but developers do not offer such profitable installments for 3 years as before," explains Daria Borzova, managing director Oazis Real Estate.

The construction cycle is quite short. The projects are small, and their construction takes 1.5-2 years. However, the prices of apartments during this time practically do not change, the increase is a maximum of 3-5%.

Thus, the secondary housing market prevails in Bulgaria today. «Often «to catch » a good apartment from the owner is more profitable than investing in a new building», – says an expert on foreign real estate Rentsale Yulia Titova.

Another disadvantage that repels buyers is the risks. Since when purchasing an apartment, an off-plan between the developer and the client is signed not the main one, but a preliminary purchase and sale agreement, in case of bankruptcy of the company, the buyer's interests are not protected in any way. 

It happens that the building is built, finished, but it is not put into operation. You can live in such a house, apply for a residence permit, permanent residence, but you will have to pay for electricity at industrial tariffs.

The degree of riskiness of off-plan transactions is also indicated by the policy of banks regarding mortgage loans. At the initial stage, it is impossible to get a mortgage at all. If a rough construction is completed, that is, there is a frame, the bank gives 25% of the total cost of the apartment. After completion of all works, the loan amount available to the buyer reaches 75-90%.

Developers understand that customers may be afraid to invest in the project, given the degree of insecurity of transactions, so they offer to make payments according to a certain scheme. For example, «at the pit » the client makes an advance payment from 20% to 50%, then at the stage of «Act 14», that is, when the concrete frame is erected, another 10-20%, then at the stage of «act 15 », when the finishing is done, installed elevators, MOPs are prepared, another 10-20%, and after the signing of Act 16, when the building is fully completed, electricity, water supply, sewerage are installed, the remaining amount is paid.

"If you need real estate in a large city, for example, in Varna or Burgas, you will have to look at projects at the initial stage of construction, since there are not so many new houses built here, and the old housing stock prevails in the secondary market," says Daria Borzova. – The only recommendation – to choose a proven developer who has been on the market for many years, has withstood crises. For example, developers who have already built such famous complexes as "Pantheon", "Flora", "Central Park", "Pearl", "Atlantis". There are very few projects under construction in the resort area. But there are good options in ready-made, not so long ago built houses.

 

Author: Elizaveta Barskikh

Photos: depositphotos.com