30.06.2024
For many people around the world, the very word “Cyprus” is synonymous with real estate. In recent years, the property market in Cyprus has experienced a surge in the popularity of properties under construction. This may be due to high demand and low supply of properties ready for delivery. Whatever the reason, it is undeniable that these off-plan properties offer buyers a unique opportunity.
Let’s take a closer look at the advantages and disadvantages of real estate under construction, as well as ways to eliminate the shortcomings.
Contents
Buying a property under construction has some disadvantages.
Possible delays
Construction delays are possible for properties currently under construction. If you are buying a property that is under construction, this means that construction has not yet started and therefore the delivery date is more difficult to plan. Factors such as regulatory approvals or unforeseen circumstances may delay project completion dates. However, by adding penalties to the contract, the buyer can ensure that he/she receives an amount equal to or close to the market rental value of the property during the delay.
The situation on the real estate market
The real estate market is changing, meaning that the potential for property values to decline during construction could result in a buyer’s investment being worth less than anticipated. Moreover, if a comparison is made between the markets of Cyprus and Dubai, it can be seen that both markets have faced a boom and bust cycle. In the case of Dubai, the cause of the crisis was that investors bought properties and paid only a deposit with the intention of selling the property under construction before having to make payments during construction.
Developer insolvency
While this is a less likely scenario these days, there is always a risk that the developer may encounter financial difficulties or insolvency, jeopardizing the completion of the project. That’s why the developer’s reputation and the company’s longevity, as well as other protective legal measures, are so important.
That being said, there are many benefits that an investor can gain by considering investing in pre-construction real estate.
Lower prices and investment potential
The developer usually launches the project for sale during the construction phase to attract investors. While permits are in the process of being issued, properties are offered at lower prices than completed projects, attracting investors who want to benefit from potential appreciation as the project progresses and the market develops.
The ability to do everything the way you want
Purchasing off-plan properties allows buyers to make changes to the design and decoration of their property. This customization can range from selecting fixtures and equipment to changing floor plans, ensuring the property suits their specific needs and taste.
Modern design and amenities
Since the properties are under construction, this means that they will include the latest architectural designs and modern amenities. Depending on the builder’s aesthetics and approach to functionality, buyers can expect state-of-the-art amenities, energy-efficient systems, and contemporary living spaces.
Flexible payment terms
If the buyer wants to move into the property immediately, this means that the purchase price of the property must be paid immediately. However, purchases during construction offer flexible payment structures, allowing buyers to spread the cost over the entire construction period.
Undoubtedly, purchasing real estate under construction is associated with great risk, but the risk can be significantly reduced by issuing certain securities.
Due diligence
Conducting a thorough study of the work performed and the financial stability of the developer is mandatory. As mentioned above, a company’s reputation in the industry is an indicator of risk reduction, especially in Cyprus where the market is small and news travels quickly.
Protecting your investment
Perhaps the most important tool to secure your investment is obtaining a bank guarantee. This means that you pay money to the developer’s bank, but the funds are blocked until certain pre-agreed conditions are met. Such conditions may include the issuance of permits and then subsequent issuances tied to the progress of construction of the project.
Even in the absence of a bank guarantee, staged payment is strongly recommended as the buyer’s obligation to pay only arises upon completion of certain stages. Such steps must be confirmed by the project architect, who many consider to be biased (hired by the developer), but the truth is that architects are bound by a duty of care. The buyer always has the option to request payment once the independent architect appointed by the buyer has confirmed completion of the construction phase.
Detailed contracts
Signing a detailed contract including plans, specifications, deadlines and penalties for delays is mandatory. The contract must also include a clear description of the property, including materials and finishes. This is why it is important for the buyer to hire an experienced real estate attorney to draft such agreements.
Buying a pre-construction property in Cyprus offers numerous benefits, from cost savings to customization options. With careful consideration and guarantees, it can turn into a successful and profitable real estate investment.
