Is It Safe Buying Off-plan Condominium in Thailand?
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The process of buying a condo before the project’s actual completion, simply based on “Plans” (I.e. Sales Brochures, Floor Plans and Renderings) is common practice in Bangkok. Developers big and small are constantly blanketing the Capital’s media outlets from newspapers, billboards to even social media platforms with adverts touting their latest launch!
For those unfamiliar with this sales and marketing environment, the process may seem incredibly risky. This article will aim to demystify the concept of buying a Condo Off-Plan, by reviewing the following guide.
Benefits & Risks buying Off-plan Condominiums
Buying Off-Plan offers several benefits notably:
– Delayed Payment Terms
Since the Project is not developed, the Condo Payments are delayed over a series of installments (Usually spread over 1-3 Years). Giving time to either prepare the necessary funds or potentially “flip” the condo for a profit before completion.
– Guaranteed Price
In a rising market, Off-Plan Condos offer the benefit of guaranteeing “today’s price” for a Project that will complete in 1-3 years’ time. In a bullish market where property prices are rising, this could potentially allow buyers to lock-in paper profits upon completion of the development.
So what are the biggest risks of Off-Plan?
Very simply, there is always a risk that the Development is not completed for a variety of reasons such as an economic downturn, construction mismanagement or simply lack of unit sales.
– Substandard Development
The Developer could over promise and under-deliver producing an end-product which is below initial expectations.
Purchase Process and Payment Plans
As briefly mentioned above, Off-Plan Condos are usually sold and marketed with a delayed payment plan structured in the form of a series of Installments. This is done to compensate buyers for the risk of non-completion.
While payment plans may vary between developers, usually for Foreign Buyers installments are structured as follows:
1st Payment 2nd Payment (15%) 3rd Payment (15%) 4th Payment (70%)
Booking SPA Contract Signed within 14 Days Remaining Down Payment within the next 14 Days Upon Completion
– 1st Payment: Booking usually a symbolical amount (Typically between 50-150,000 THB) to confirm reservation of the Unit.
– 2nd Payment: Draft Sales and Purchase Agreement (SPA) sent to buyer for consideration; once approved, buyer to sign Official SPA and pay 15% Installment.
– 3rd Payment: Another 15% Installment to be paid. (Total paid up to this point: Reservation and 30% Installment)
-4th Payment: Final 70% is due only upon completion of project.
*Payments are transferred directly to the Developers Account, so they can issue Foreign Exchange Transaction Forms (FETs), to comply with the Thai Condominium laws.
Additional Costs of Buying Off-Plan
It is important to note, that other than just the “Sales Price” there are extra costs to consider. These are important extras to account for, that can often be forgotten or overlooked especially if an Off-Plan Condo is reserved at a glitzy sales event or in the polished showroom of a project.
1. Cost of Furnishing the Condo
While most Condo showrooms are advertised with beautiful furniture, decorations and props actual condos are usually sold barebones. Therefore it is important to check if the property is sold fully furnished, partially furnished or only fully fitted:
– Fully Furnished
All furniture and fitted items included (I.e. Air Con Units, Cooking Hob and Extractor, Bed and Mattress, etc.)
*If offered with this condition, it is usually a good idea to request the furniture and appliance list.
– Partially Furnished
While all fittings are included, furniture and electrical appliance may only be partially provided (I.e. Bed Provided without a mattress, Sofa and TV Cabinet without a TV)
– Fully Fitted
This is the barebones option where all major fittings included such as Air Con Units, Kitchen Units and Sanitary Ware. However no standalone furniture or appliances are provided.
2. Costs of Transferring Ownership from the Developer to the Buyer
These marginal costs encompass several standard elements notably:
– Government Land Department Transfer Cost
Standard Government Fee of transferring the Title Deed (Chanote) from the Developer into the Buyer’s name. The Transfer Fee is usually marginal and equally shared between the buyer and Developer.
– Electricity Meter Setup Cost
Cost of setting-up an individual meter connected to the Condo unit by the Metropolitan Electricity Authority (MEA).
3. Building Management Costs
– Sinking Fund Contribution (One Time Payment)
This is a onetime payment to the Juristic Office that will be collected from all condo owners in a Project. Usually this contingency fund is collected in case there is an emergency issue that threatens the peaceful enjoyment of the Condo Building.
– Maintenance Fee (On-Going Yearly Basis)
This is an ongoing fee that is collected upfront for 1 year. Maintenance Fees go towards the building management team salaries and maintenance of the common areas of a condo.
Final Off-Plan Investment Tips
Off-Plan Investment can be an incredibly exciting process as Developers spend enormous resources into the Sales and Marketing Presentation of their new launches. “Hype and excitement” helps to sell!
However in the excitement of a buzzing Sales Event or as a result of the charm of an attractive Sales Person at the Project’s Showroom, it is important not to forget a simple principal:
“Buying an Off-Plan Condo is no different from buying a second-hand property”
Therefore it is important to remain grounded and carefully evaluate:
– Location of the Condo
– General Concept, Common Area/Proposed Facilities and Layout/Size of Units
– Asking Price Per/Square Meter Compared to other similar Project in the area
– Reputation and Track Record of the Developer behind the Project
Common sense and a cool head is the most important key to successful Off-Plan Investments!
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