However, there are no mass protests of deceived shareholders anywhere – unlike in Russia, problems are solved more civilly abroad, and the delay time compared to Moscow construction sites does not look so big. There is another fundamental difference – abroad, when buying at the construction stage, a phased payment is almost always provided, where the payment schedule is tied to certain stages of construction. In other words, if the construction suddenly stopped, the buyer has every right to stop payments as well.
However, the risks have increased. At the same time, the reasons for delays can be very different – from problems with documents to the termination of funding. The projects of small developers who counted solely on cash receipts from sales feel worse than others. At the same time, companies that build at their own expense or have bank guarantees do not delay their facilities at all.
Hot spots
One of the problematic markets today is Dubai, where most of the facilities were built based on speculative demand. With the crisis, the demand for an incredibly large supply disappeared, and developers had nothing to repay debts to banks and complete projects. The authorities of the emirate are taking measures to protect the investment climate, but this also affected the timing: "In 2009, in order to protect buyers, the legislative framework was greatly changed," explains Lilia Tsyryulnikova, sales manager at GreenField Property International. – It also affected the deadlines, as all kinds of checks, registration and passage of various instances take more time." However, as she adds, before the crisis, projects were also late with delivery – on average, the delay was one year.
Many buyers faced delays in the delivery of objects in Bulgaria, Hungary and Latvia. We should not forget about the USA, but with a significant caveat: in the States there is a clearer approach to the security of transactions and a number of state mechanisms prevent the "disappearance" of a developer with money.
The company "BEST-Real Estate" clarifies: if we talk not about all markets in general, but about those where Russian buyers are most active, then Bulgaria and Montenegro lead the list of problem countries. Montenegro, however, has its own specifics: "An interesting situation has developed in this country," says Stanislav Zingel, president of Gordon Rock. – The sluggishness of the state bodies responsible for issuing permits for the construction of new facilities during the crisis, oddly enough, had a favorable effect on the local real estate market and actually saved Montenegro from the massive bankruptcy of developers." For the same reason, the supply on the primary market was not too large, so experts expect the price level to recover this year.
More specifics
As a visual illustration, we can give examples of two well-known Bulgarian projects Orange County and Aheloy Beach Residence. The construction of the Orange County project, unique for Bulgaria, was expected to begin in June 2009. "At that moment there was a division of the company between two owners," says Yulia Titova, head of the foreign real estate department at BEST–Real Estate. – After that, having already remained in one hand, the complex had to begin to be built. However, during the year (!) the developer was waiting for the commission to meet to transfer the land from the protected status to the category for construction. The corresponding promises were made to developers even before the purchase of the site, but elections took place, the central government was replaced, and local officials were reshuffled. The developer was ready to start work immediately, but the bureaucratic procedure changed his plans."
The clients who chose this project and signed preliminary contracts contributed 30% of the cost. They were informed about the difficult situation and the delay in the delivery of the project for at least a year. Most of them were sympathetic to this problem, but the developer returned the deposited funds to a number of clients. Finally, by the summer of 2010, the Orange County construction permit was issued, after which work began. Now it is assumed that the first phase of construction will be completed in May 2011.
A more complicated situation has developed with the Aheloy Beach Residence project, the construction of which has been frozen due to the non-payment of regular payments by Irish buyers. The contracts were drawn up in such a way that neither the delay in payments nor the delay in construction entail penalties. The issue of raising funds from investment funds for the resumption of work is being resolved now. According to Yulia Titova, clients will have the opportunity to take ownership of real estate at the stage of Act 14, and this means that their objects cannot be arrested in the event of claims by third parties (contractors, banks, etc.), and the developer does not relieve himself of obligations to complete the project.
Time is money
If you read the comments in the press and on the Internet, it turns out that the crisis did not affect the Cyprus real estate market at all. This is not quite true: according to official statistics, in 2010 the volume of real estate sales to foreign citizens was 84% lower than before the crisis. At the same time, prices have only slightly adjusted, and there are no massive problems with construction delays.
"In general, the future of the Cyprus residential real estate market does not cause any concerns," says Vladislav Andreev, a real estate consultant at Cybarco Plc. – Of course, due to the adjusting demand for residential real estate around the world, the number of new construction projects in Cyprus is decreasing. Nevertheless, leading developers continue to bring new, and sometimes very ambitious, projects to the market."
Large Cypriot developers, as a rule, provide buyers with bank guarantees for the completion of a particular object. Companies take a loan secured by the land they own, so the construction does not depend on the pace of sales. Cybarco, for example, provides such a guarantee for the Akamas Bay Villas project, winner of the Homes Overseas Awards 2010. When the project was launched last year, it was stated that "the construction will be completed on time, even if not a single villa is sold." Work began a few months ago, but sales are already underway – largely due to the fact that buyers are confident in the reliability of the project.
In Israel, according to Stanislav Zingel, for every dollar invested by the buyer, a bank guarantee is given at 0.8% per annum, and in case of bankruptcy of the seller, the buyer receives a refund even with small percentages. In addition, as in the USA and Dubai, the buyer's money in Israel does not go directly to the developer, but to a special escrow account, which the seller can dispose of only after the completion of a certain phase of construction.
Despite the fact that such protective systems are not provided for by law in Turkey, no serious scams have yet occurred on the primary market. Experts of GreenField Property International say that the main thing is to include in the contract a clause on the stages of payment and a penalty in case of a delay in construction. Usually, for the first six months of delay, the developer pays the buyer an amount equal to the average rent for the apartment, and after this period is obliged to pay a fine and return the money that the client contributed. At the same time, the standard construction period of the complex in Turkey is 12-14 months. Thus, everything is quite calm in the Turkish housing market under construction, off-plan objects continue to be bought, including for investment purposes: the finished object can be resold for 20-30% more expensive.
Kind parting words
What should those who, having made a purchase, find themselves in a situation of forced waiting do? Wait for a change in the situation or try to return the funds? "Of course, it is more correct to wait," Yulia Titova believes. – Problems are being solved, but it takes time. We meet with our clients, try to provide legal and psychological support. If possible, we move them to ready-made complexes from the same developer, organize free accommodation for them for the period of delay in ready-made projects. I sincerely wish all of us to survive the difficult times and start rejoicing in the changes for the better as soon as possible."
And how to reduce the risk to those who are now eyeing projects under construction? The advice will not be too original: you need to analyze how the developer fulfills his obligations on other projects, ask about the availability of bank guarantees, by all means insist on including penalties in the contract in case of a delay in construction and never agree to pay the full cost of not yet finished real estate, insisting on a phased installment plan.
However, today a potential buyer can easily save himself from the risk of delayed construction by buying ready-made housing. Fortunately, at the moment there are plenty of such proposals in all countries.
