Unlock the Secrets -10 Must-Know Tips for Off-Plan Buyers!

Buying property off-plan is purchasing a property before it’s fully constructed. This has become an attractive option for many investors and homeowners in Kenya. It offers the chance to lock in prices before property values increase and to customize aspects of the home. However, it also comes with risks that buyers needs to be aware of.

Here are key things to look out for when buying off-plan.

Table of Contents

1. Developer’s Reputation

Before committing to an off-plan purchase, research the developer’s track record. This helps you assess whether the project will be completed as promised, on time, and up to standard.

Example – Look into previous developments by the same developer. Have they delivered on time? Were buyers satisfied with the quality?
Tip – Visit completed projects and speak with past buyers if possible. Check for any complaints or disputes with the developer.

2. Project Approvals and Documentation

Ensure that the developer has obtained all necessary government approvals for the project. This includes the title deed, land ownership documentation, and building permits. Without these, there’s a risk that the project could be delayed or even halted.

Example – Request copies of approvals such as NEMA (National Environment Management Authority) approval and county building permits.
Tip – Engage a conveyancing lawyer to review these documents and confirm their legitimacy.

3. Payment Plan and Financial Viability

Most off-plan projects offer staggered payment plans, where you pay in phases as construction progresses. Carefully evaluate the payment schedule and make sure it aligns with your financial capability. Be cautious about paying too much upfront, as this increases your risk if the project is delayed or abandoned.

Example – A typical payment plan might involve a 20% deposit, 30% at the halfway point, and the remaining 50% on completion.
Tip – Try to negotiate a payment plan that ties your payments to construction milestones.

4. Project Timelines and Construction Milestones

Make sure the developer provides a clear timeline for the project, including key milestones such as the foundation being laid, the structure being completed, and the final handover date. It’s also important to understand what happens if the developer misses these deadlines.

Example – The contract may stipulate penalties or refunds if the developer fails to meet the agreed construction timeline.
Tip – Ask for monthly or quarterly construction progress updates from the developer to monitor progress.

5. Completion and Handover Specifications

Understand what is included in the purchase price and what the final product will look like. Check the specifications for fixtures, fittings, and finishes that will be included in the completed property. Sometimes, developers offer glossy brochures, but the actual handover may fall short of those expectations.

Example – The developer may promise granite countertops and hardwood flooring, but the contract may only guarantee generic materials.
Tip – Request a detailed list of materials and finishes in writing and visit the construction site if possible to see the quality firsthand.

6. Exit Strategy or Resale Value

While buying off-plan often offers the opportunity to buy at lower prices, it’s important to consider the property’s future resale value. Research the area’s growth potential and the likelihood of property appreciation. This is particularly important if you plan to sell the property shortly after completion.

Example – An off-plan property in an area with improving infrastructure, such as new roads or shopping malls, is more likely to increase in value.
Tip – Speak with local real estate agents or experts to understand the long-term potential of the area.

7. Escrow Accounts

Some developers use escrow accounts to hold the buyer’s funds, ensuring that payments are only released when certain construction milestones are met. This reduces the risk of losing your money if the developer fails to complete the project.

Example – Your deposit and installments would be held by a third-party financial institution, and the developer receives payments only as construction progresses.
Tip – Insist on an escrow arrangement if available. It provides an additional layer of protection.

8. Possible Delays and Contract Flexibility

Construction delays are common in off-plan purchases, so it’s important to be prepared for this possibility. Make sure the contract allows for flexibility in case of unforeseen circumstances such as delays due to weather or changes in government regulations. Also, review what happens if the developer is unable to complete the project on time.

Example – The contract may include a “force majeure” clause that covers unforeseen delays but should also protect you from excessive delays.
Tip – Negotiate terms for compensation in case of significant delays, such as rent coverage or refund options.

9. Mortgage and Financing Options

If you are financing the purchase through a mortgage, ensure that your bank or lender is comfortable with financing an off-plan purchase. Some banks may be reluctant to lend for off-plan properties due to the risks involved.

Example – A bank may offer a mortgage on the condition that the developer meets certain milestones before funds are released.
Tip – Work with a mortgage broker who has experience in off-plan purchases and can find a lender willing to finance the project.

10. Post-Handover Maintenance and Fees

Once the property is completed, there may be additional costs for maintenance, such as service charges for common areas in apartment complexes. Ensure you are aware of these fees and whether they are reasonable and sustainable in the long term.

Example – An apartment in a gated community may have monthly service charges for security, landscaping, and cleaning services.
Tip – Ask for a breakdown of these fees before signing the contract to avoid surprises later.

Conclusion

Buying property off-plan can be a rewarding investment, but it also comes with inherent risks. By conducting thorough due diligence, understanding the terms of the contract, and being aware of potential pitfalls, you can make a more informed decision. Work closely with a qualified lawyer, monitor the construction progress, and ensure your finances are in order to minimize risks and maximize the benefits of buying off-plan in Kenya.