Is It Safe To Purchase Off Plan Property In Thailand?

We all know of those stories where people have purchased off- plan properties and something has happened along the way causing them to lose some or all their money.

In certain parts of the world off- plan can tend to have a negative connotation attached and at times known to be considered risky investments. Of course there is always an element of risk in purchasing off plan. In this article we highlight the main reasons buyers are choosing to purchase off- plan and how to minimize this risk if you are prepared to do your homework.

As the property market expands in Thailand, so too has the demand for more and more projects. Specifically those of a condominium style have become popular to build. The real estate industry has become extremely competitive with an abundance of off- plan units available to choose from.

What are the things one should consider when looking at off-plan compared to something that ready built?

You will have to have a look at how many completed projects this particular development company has under their belts. Of course the more completed projects, the more credibility available. The other thing to consider is how the project is financed? Is their sufficient financial backing that ensures the developer is able to meet his obligations and complete the project within a respectable time frame? If there are any loans on the land this could raise questions and one needs to be extra careful as the bank will then hold the title deed, therefore the company will not have the land transferred into their name until all loan repayments have been completed. You are able to request the documentation such as “land title deeds” to be produced if need be. These are extremely important in providing prospective buyers with some form of security. If these cannot be produced, a valid reason as to why these are not available should be given. In some cases if prospective buyers are purchasing within the pre-launch period of a project, the developer is then giving clients the opportunity to purchase at the minimum price per square meter and everything may be legal, however things are still being finalized, causing no reason for concern. You will however need to be given a due date to which the company are obliged to produce such documentation and if they still cannot be produced, be entitled to some money back.  Most developers in such circumstances are fine with this condition. This is where it is helpful, if you are first time buyer/investor, to have the help of a good real estate agent and an English speaking lawyer, preferably a lawyer who specializes in property law.

Adding to the document needed such as “land title deed” there are a few other vital documents that is needed to allow construction to proceed. You would be wise to request the following documentation be presented before making any decisions.

The first being the EIA approval. This stands for Environmental Impact Assesment. Without this it is illegal to build. It does unfortunately take time to receive these documents as there are many parts to this process and the final decision is made in Bangkok, this also causing the process to take time. It can cause people to be concerned when this is yet to be approved. If the developer has had many project to which they have completed , then chances are they won’t have any problems in having such documents issued and therefor if considering purchasing before these have been received then this would be of low risk. It would just be a case of formality and these will be issued.

Just as EIA is needed, they of course also need “building permits”. In Thailand construction is regulated by the Building Control Act. This act is to provide governmental control for pretty much all types of construction. Heavy fines are in place for anyone who does not wait for these permits to be issued or in any way in violation of this act.

The EIA approval and building permits are usually issued around the same time it seems.

In Thailand it can be common for contractors to deliver projects later than that of the expected delivery date. Unfortunately this can be due to such factors beyond ones control like heavy weather. Thailand being of a tropical climate, does experience heavy monsoons. These tend to happen during the months from May to October and contractors do have to stop for certain periods of time due to such weather. A professional developer will know to incorporate a certain amount of what is termed as “wet time” into the schedule. This should be stipulated in the sale and purchase contract and can be anything from 30-90 days. This should be in place so as not to raise unrealistic expectations on delivery dates, or the developer can be liable for late penalty fees. It is also common practice in Thailand to offer the client some form of compensation, if late on delivery for anything beyond six months after the completion has been reached, date as per the contract. If the contracts stipulates you are not entitled to anything after this, then this does raise cause for concern as they can then deliver the project as and when the feel like.

If this is the developer’s first project you also want to make sure you do your due diligence as best you can , due the fact that there won’t be any form of track record to confirm things will go ahead and therefore while you may be getting a good purchase price , you need to feel as secure as possible. Using a lawyer in this case is vital to ensure your contract protects you the buyer, as much as possible.