The real estate industry in Kenya has experienced a rapid growth curve over the years. Off-plan refers to property that is available for purchase before construction or completion. In most cases, developers use image renders and pre-construction layouts to market and sell the property to home buyers and real estate investors. Buying off-plan property is more beneficial compared to buying ready projects.
Benefits of buying off-plan property in Kenya
- Lower initial prices – Buying off-plan property means enjoying relatively low prices compared to when a property is complete. When we started our Moon valley project in Kileleshwa, the initial cost for the 3-bedrooms with a DSQ was 24M. The same unit is currently going for 27.5M. The unit has had an appreciation value of 15%.
- Flexible payment plans – Most developers require a 20%-30% deposit as a down payment. For instance, in the Wilma Towers in Kilimani, we broke ground in October 2019. One of the 1-bedroom units was initially going for 4.9M and is currently going for 6.8M. Therefore, if you buy a unit now, the unit will have appreciated by 39%
- Easy to change the layout plan – Since construction has not begun or is ongoing, you have the benefit of making changes to the initial house layout. For instance, if you want a bigger bedroom and a smaller living room, you can adjust your house plan accordingly.
- The option of changing your finishing materials –However, it is essential to note that any additional cost incurred is billed to the buyer.
- Monitoring progress – You can monitor the construction of your house from the foundation, the finishing material used, to the completion.
Challenges of buying off-plan property
- The uncertainty of buying property that is under construction at the time of purchase – Developers sell you the future ROI. There are chances of the property not appreciating to the extent the developer had promised. Property appreciation is affected by a change in the market conditions, political and social changes, poor infrastructure development, among other reasons.
- Uncertainties of the completion date – A real estate sales agreement has two dates, a shortstop, and a long stop. A short stop date is the estimated date the developer expects to finish a project while the long stop date is the date by which they must have done so. In the Kenyan real estate market, developers are given a 6 months leeway after the short stop date elapses. Thereafter, financial compensation is expected or the amendment of the contract.
- The completed property may not be per the buyer’s expectations – This mainly applies to the material used for the finishing. A developer may end up using materials of inferior quality compared to the desired quality.
- Developer’s insolvency – As seen before, there have been instances where developers have become insolvent after buyers and investors have bought an off-plan property.
- Mortgage financing – Most financiers do not offer mortgages for off-plan projects. However, our Moon valley project in Kileleshwa can be mortgage financed.
How to carry out due diligence before committing to an off-plan project
Just like any other investment, due diligence is vital. There is nothing wrong with being a Thomas because seeing is believing. However, when it comes to off-plan projects, the only tangible thing is the piece of land and maybe an ongoing construction. Therefore, to be on the safe side, it is vital to
- Do some research on the track record of the company – How long has the company been in existence? Where is their physical office? Do they have any finished projects yet? It is essential to evaluate a developer and their track record before committing.
- Do a background check on the personnel involved in the project- Research on the architect, the main contractor, and the project manager. Which projects have they done before, and how was the outcome? The main contractor is supposed to be a registered member of the National Construction Authority.
- Do a physical site visit – Know the exact location of the project. Also, you can do a background check on the piece of land at the Ministry of Land and the physical planning registry.
- Do your research on the possible challenges that can occur to avoid disappointment in the future. For instance, there are possibilities for the completion date to be adjusted due to unforeseeable circumstances.
- The payment plan should be in line with the completion date – In most cases, your last installment should be in line with the handover.
- The payment plan should be highlighted in the sales agreement. All the installments should have their due dates. Always seek legal advice for proper contract interpretation.
In conclusion, the benefits of buying off-plan projects outweigh the challenges. Check out our ongoing off-plan projects, the Elite Residence, Moon Valley Apartments, the Divine Suites, and the Wilma Towers for more information or contact us through 0725 111 444 / 0790 554 433.
Blog by: Anne Kamau-VAAL