Identifying ponzi schemes in off-plan buying
With any real estate deal, due diligence is key! As with most investments, seeing is believing – especially for the skeptical buyers. For such kind of buyers, developments that are complete for occupation are attractive investment opportunities. However, there are those who are risk takers – those who prefer to invest/buy into an off-plan development. If you fall into this category, here are some pointers that can help you sieve through the numerous real estate deals to fix your eyes on the sure deal.
- Track record of the property developer. It is important to take time to evaluate the developer’s other projects and their record in the delivery of projects within the stipulated timelines. A developer that has been in the market for a number of years is preferable for obvious reasons. There is a sure track record of the works that they have done.
- It is also a good idea to look at the project team ranging from the Architects to the Main contractor just for your own peace of mind that the project is in good hands. More often than not, a project worth investing in will be sure to onboard consultants based on previous experience in a particular area of real estate. One can go even a step further to check on the certification of the different consultants. The Main contractor, for example, must be registered under the National Construction Authority (NCA): preferably NCA 1 category
- As a client buying into the project, it is your right to visit the site before buying into the dream. Many are the cases where clients bought a unit or land which was completely non-existent. This is especially true for the diaspora market, where buyers are miles away. In such a case, the best thing to do is to have a trusted family member or friend go for a site visit to physically check that what you’re buying into is not a hoax
- Information is key. As a client, insist on periodic updates on the project plan including major milestones such as groundbreaking. Quarterly updates are good enough to ensure that there is adequate measurable progress in the project. Any company that is not willing to give free information to clients or even advice concerning the real estate project should raise a red flag. Any client-related business has free-flow of information to clients
- Verify the payment schedules that you are provided with. More often than not, an off-plan buy will involve buyers negotiating independently with the developers on the suitable payment plan. An ideal payment plan should last up to the end within the completion dates of the project. Be sure to seek legal advice for interpretation of the contract that you are provided with before appending a signature. The contract should clearly state the amount of initial deposit agreed upon and then detail the specific dates when other payments are expected to come through until completion of the project
- It is important to also identify realistic assumptions in a project and be well versed with the challenges that construction projects are bound to face from time to time. In this way, if there are any delays for one reason or another, then you as the client are not left in distress wondering whether to withdraw funds at an advanced stage of construction. Be proactive as a client!!
In conclusion, information is power. As a buyer, be armed with information on the property that you are buying into so that you are certain that your monies are in the right hands.