An off-plan property signifies the buying of a property that is not yet complete. The construction may be at any stage – even at the pre-licensing stage, if you are buying a property that has not yet fully completed in all regards, then it is said to be an off plan property. The demand for pre-construction overseas property, or off-plan property, has seen a steady rise over the past decade as more investors turn to the overseas property market for bigger capital growths. On the face of it, investing in property abroad seems a good proposition, but it’s always advisable to acquaint yourself, as far as possible, about the pros and cons of an unfinished property.
Advantages Of Investing In Off Plan Property Abroad
An off-plan property investment abroad entails a whole lot of advantages to the investor. Some of these include –
The foremost advantage is the price factor. You can avail strikingly lower prices for the undeveloped property. The builders offer these discounts because they need to raise immediate capital for construction purposes. Moreover, it’s always the endeavour of a builder to sell the property during construction to offset any probability of failure to gain from selling it in future. Another reason for builders to offer off-plan property at discounted rates is to obtain better interest rates on their development loans from banks and investors. The price obviously has to be on a lower side for an unfinished construction as the builders have hardly anything to show except for a floor plan and an artist’s impressions of the finished development.
Moreover, even this discounted price is not paid immediately. Normally, the builders ask for 20%-30% deposit at the time of the Sale Agreement, and the balance normally becomes payable on completion of the property. You can easily finance the balance on a 70% mortgage in most countries.
Investment in an off-plan property overseas will, most certainly and drastically, mitigate your capital gains tax liability.
If all the payments you make to a builder are covered by a bank guarantee, it means that anything paid is returned to you should the builder defaults. So, your investment is largely secured by a bank guarantee.
An off-plan property investment gives you a chance to supervise your returns on the property during the construction period as well, which is generally 1-3 years. This way you can realize the profit during the construction period as well, should you require immediate money. This benefit is particularly significant if one considers the small amount invested in the form of deposit at the time of Agreement.
The overseas property should be alluring enough to invest. In other words, the builder must, at least, promise to employ state-of-the-art construction materials and install modern gadgetry to make the finished product an exciting proposition to reap maximum rewards, if resold. Some builders also allow the investor to choose the fixtures and fittings to be installed during the construction.