Guide to Buying Off-Plan Property in Kenya

Buying off-plan properties is something many homeowners shy away from as they feel it is a complicated process that can end up frustrating their house acquisition plans.

For starters, buying off the plan property refers to a process where an investor buys into a new development long before construction begins.

Although this may sound like a risky business, the concept of buying houses off the plan is increasingly gaining currency among prospective home buyers in Kenya.

However, before you commit to this arrangement, you should consider both the benefits and risks of this type of investment.

Benefits of buying off the plan

1.) Lock in a price – The main benefit of purchasing off the plan is that you get the opportunity to buy a home at a discount. Even if the property values go up during construction you will still pay the discounted amount for the property.

2.) Low initial capital outlay – In most cases, the developer requires you to make a 10 per cent deposit to secure the property. The full payment is made when the property has been built. This enables you to secure a high-value asset for a low initial capital outlay.

3.) Property appreciation – Depending on the prevailing market trends, the home bought off the plan may increase in value when you make the entire payment two or three years later.

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Risks of buying off the plan

1.) Unfulfilled expectations – There is a risk that the quality and standards of fixtures of the home will be different from those you had seen in a display house at the time of the sale.

2.) Price fall – Property prices rise and fall. There is no guarantee that the price will go up and you may find yourself paying too much for the house if the market falls during construction. If this happens you may find it hard to secure finance for the total amount.

Even if the prices rise over the construction period, it may not be easy for you to sell the house on completion especially if there are many investors in the same development.

3.) High interest rates – Banks may hike rates before you settle on the property and this can make things hard for you if you are planning to fix the term of the loan at the current rate.

Golden rules

1.) Adopt an attitude of healthy skepticism towards off-the-plan property marketers.

2.) Invest in prime locations and never buy off the plan unless you have inspected the site.

3.) Carefully check the credentials of all the involved parties – the developer, the contractor, the management company, the financiers, etc.

4.) Research the market. Find out the amount of money that a similar property would sell or rent out for. Never rely on the developer for this information.

5.) Ask experienced professionals for advice.

6.) Study the contract closely. If you plan to flip the house, watch out for restrictions on sales. Insist that the developer must advise you in case of any changes to the plan.

7.) Ask for an on-site inspection. If the developer has not started work, ask for a visit to their other developments.

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