Investing in off-plan properties offers a range of benefits and has proved to be a worthy investment for many investors in Pakistan. On the other hand, buying off-plan properties can quickly become a risky adventure if proper attention is not paid to homework and the times to come. We had previously discussed some ways to reduce risks on off-plan properties, and now here’s our take on some advantages and disadvantages of buying off-plan properties. But, before we begin our analysis, let’s first understand what off-plan properties are and the factors that differentiate them from other properties.
Understanding Off-plan Properties
Pakistan features an entire spectrum of real estate options for both property seekers and investors. Both have the freedom to invest in anything from commercial to residential and upcoming to existing projects – all of which mainly depend on three things: how well they are familiar with the ways of the property market, their budget, and their specific requirements.
In this regard, investing in off-plan properties is a reasonably popular option among buyers and investors due to their affordability, which we will discuss later in detail. For now, let’s stick to understanding off-plan properties. Simply put, off-plan property is a type of property that is yet to be built. These properties are also known as “pre-construction properties” or “real estate projects” in Pakistan’s property market. While some call it “buy now – pay later” properties.
Additionally, off-plan properties are usually bought by three types of buyers in Pakistan:
- Home seekers who buy the property to live in it.
- Investors who plan to sell the property upon completion to earn a profit.
- Investors who buy an off-plan property to earn subsequent profit in the form of rent.
Apart from which category you fall into, for now, you should be certain about the goal behind your investment in off-plan properties. So, with a clear understanding of the word off-plan properties, let’s take a look at some advantages and disadvantages of buying off-plan properties in Pakistan!
Advantages and Disadvantages of Buying Off-plan Properties in Pakistan
Let’s take a look at some pros and cons of off-plan properties:
- Affordable Investment
- Possession and Control
- Long-term Investment
- Project Delays
- Economic Fluctuations
- Final Product
Affordable Investment
Investing in off-plan properties is similar to investing in a vacant piece of land and then saving to develop it at a later stage or time. Most developers offer a quite affordable and flexible payment plan and do not ask for the full payment all at once. So, basically, these flexible payment plans enable a commoner to consider investing in the real estate industry by making it an affordable option for every type of investor.
Possession and Control
As much as buying off-plan properties is an affordable option for all types of investors, nobody has control over its execution, completion, delivery, and possession. As such, this type of investment does not completely suit a buyer who wants to enjoy control over the factors mentioned above. The other type of buyer does not mind trusting a developer to do the job for them and deliver the project as per the timeline committed.
The uncertainty of possession and lack of control over off-plan properties is also mainly a major turn off for few buyers because they want an immediate place to settle. So, if you’re trying to settle in a new area or city on an immediate basis, off-plan properties are not something we’d suggest.
Long-term Investment
Driven by the lack of control and uncertainty of possession, off-plan properties are mostly considered to be a long-term investment in Pakistan’s property market. So, when buyers are investing in off-plan projects, they are deemed to be financially committed for a longer duration [with a payment plan], which leaves their finances secured and rolling, too.
Unlike other properties, buyers cannot enjoy recurring profits from rental, nor do they have any control over its sale until the unit is ultimately handed over.
Project Delays
One of the biggest disadvantages of buying off the plan properties is that the construction goes over the sunset period. This delay is mostly not in control of the developers, considering influences such as labour strikes, permits, and other legal procedures, supplier delays – not to mention weather conditions and law and order situations.
In such cases, buyers can only take a follow-up from the developers and remain assured that the project will be delivered. However, buyers can look at the brighter side of the picture, and consider the delay as an extension of the deadline to pay their dues.
Economic Fluctuations
According to the general rule of business and economics, the money today is worth more than the same amount of money in the future due to its capacity to be easily multiplied through investment. So, if you invest a certain amount of today and you let it remain invested for the upcoming years, let’s say, for the coming 5 years, then at the end of the contract, you will have more than you’ve invested – subtracting the risk and loss factor.
However, counting risk and loss, no investment is safer than securing your money in real estate products. And, with completely flexible plans, off-plan properties are one of the most reliable options despite various economic fluctuations.
On a side note, you can keep track of the economy, real estate, and other social projects by visiting Zameen News.
Final Product
As mentioned earlier, buyers and investors have no control over the project’s construction and planning, so the resulting product can be different from their expectations. At times, the property is also slightly different from what was shown in the brochure. So, if you’re excited about that branch of tree touching your balcony, you should expect that it won’t.
Now there are several other external and internal factors to consider before investing in off-plan properties, but we’ve picked up the most important ones in this blog and discussed them to give a better overview of the things to anticipate. Let us know your takeaway from these advantages and disadvantages of buying off-plan properties in Pakistan at blog@zameen.com.
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