Buying Off-plan vs Completed Property

Updated on April 18, 2023

Real estate remains to be the most attractive investment among any other forms of investment. By purchasing a house, land, or condominium units, it guarantees a profit as the value of these properties is expected to increase in the long run.

If you are about to buy a property in Cambodia, the first question in your mind must be “which type to purchase?” There are actually two types of unit that you can choose from, the off-plan units and completed units. 

In this article, you will know about the nitty gritty of buying properties on its off-plan stage.

What is Off-plan Stage?

In real estate, the off-plan or pre-selling stage is when a property is offered in the market before they are even built completely. During this stage, developers sell during the construction period, or as early as owning the land where the property will rise. This means that the actual property does not exist physically yet, because it is either in the process of planning or is still under construction. 

Essentially, you are buying not the physical property but the project or the plans for the unit in that complex that is going to be built in three to five years. Interested buyers are then presented with brochures, a blueprint of the layout plans, a virtual tour, or a showroom of model units, which is why pre-selling is also called as “off-the-plan” properties. These properties are usually in the form of townhouses, condominium units, and houses and lots.

Off-plan Property VS Completed Property

In deciding on which property to buy, there’s little or no room for mistakes because once you bought the property, there’s no turning back. As a buyer or investor, it is important to understand your options based on your desired purpose. 

While off-plan properties are those currently under construction and not readily available, completed properties are those that are already built and ready to be occupied right away. To know which property fits you the best, other differences between off-plan and completed properties are listed below.

What is Off-plan Property

When condominium units are currently being developed, the developer or property management already starts marketing the building to sell units.

Perks of Buying Off-plan properties

More than the amenities in the brochure given to you, here are some of the perks of buying off-plan properties:

• Lower value – Most condominiums that sell properties that are currently being developed, the units are always cheaper compared to what their market price will be once it’s ready for turnover to the investors. This means if you’re looking to invest for less, then pre-selling units are the option for you.

• Great investment – Pre-selling units are great choices as an investment since you can get a head-start on a valuable real estate property before its prices follow the market value—which is usually higher than the pre-selling price. This means your ROI will be higher especially once you decide to lease it.

Drawbacks of Buying Off-plan properties

Off-plan units have numerous selling points but it does have its own drawbacks. Here are some the possible inconveniences you can experience with buying a off-plan unit:

• Scammers – Since there is no visible condominium building for pre-selling units, there are scammers who take advantage of this by putting up their own listings amid legitimate listings. However, you can avoid falling prey to these scammers by doing your due diligence in researching the property listed and checking for the legibility of the real estate representative you’re talking to.

• Liability – Not all condominium buildings under construction push through with finishing the building. Sometimes the project simply stops because of bankruptcy or other reasons. If you already invested in a pre-selling unit when this happens, it’s a financial liability. While you can sue the property developer, it might take a while for you to get your money back since legal cases can be slow in their process.

What are Completed properties

Unlike off-plan units, completed properties are units you can already use or lease once you buy it. It has numerous advantages for investors like you so continue reading below.

Perks of Buying Completed properties

Besides the convenience of getting an already built property that you can use immediately, there are other perks to it. Some of the advantages are listed below:

• Quick move-in period – Since a completed unit is already built, there is little to no waiting time for you to move-in. If you want to lease it, then you can immediately post the listing of the property or have a real estate broker help. 

• Amenities – With completed units,  you can directly see the amenities that the condominium building offers. This is not possible with pre-selling units since the amenities they offer can simply be a marketing tactic or it’s changed while construction is ongoing. Buying ready for occupancy units in Cambodia ensures you get exactly what’s listed and everything that accompanies it.

Drawbacks of Buying Completed properties

Completed unit has a couple of drawbacks that it offers as listed below:

• Price value hike – Buying a completed unit tends to have a higher price compared to a pre-selling unit since the developers have already raised its value according to the market price. 

• Limited options – There are limited choices when you’re in the market to buy a completed unit because some of them have already been bought during the off-plan stage and more. However, there are great choices available so always make sure to check various listings.

Reasons why developers do off-plan selling

There are many reasons why developers do off-plan selling or pre-selling. One is to help developers finance the actual construction, while the other is to ensure that all units or the entire property becomes sold out once it is completed. This practice is legal and acceptable but has certain underlying terms and conditions.

It’s kind of similar to a business proposal where a businessman says, “This is what I am planning, it will result to some kind of this. If you want to achieve this give me a budget and I’ll execute it.”

Payment Scheme of buying properties in off-plan stage

When a buyer decides to move forward to buying a pre-constructed property, it comes with a payment scheme that typically follows this method:

1. Less than five percent, for instance two percent, of a certain (x) amount of price is usually paid upon the offer to buy the property. 

2. The remaining balance left to complete the five percent is due to be paid within 30 days. In this example, the remaining balance is three percent. (Total = 5%)

3. Another five percent is due in 90 days which is a total of three months and a total of ten percent paid. (Total = 10%)

4. Then, another five percent should be paid in six months or 180 days. Once paid, the buyer by this time is at a total of fifteen percent. (Total = 15%)

5. The last five percent is due at occupancy or after the property is completely built. This is when the buyer finally gets the keys and is at twenty percent which is roughly the down payment. (Total = 20%)

This process is applied so that the developer of the project can use the initial payment collected to finance the entire project such as construction and carrying costs while the units are being built. 

Note that occupancy is different from possession of property. Occupancy refers to a stage where an individual can finally move into the unit, either for the purpose of renting or owning it. Possession, on the other hand, is the stage where one legally owns the property. This means that they’re now in title for the property and when they can start paying the mortgage, and this begins after paying the complete down payment of the pre-sold property.

Off-plan Projects in Cambodia

Off-plan properties are gaining popularity in Cambodia and this is attributed to the several off-plan projects being launched every year.  

Launching development of boreys or gated communities is also becoming a new trend—aimed at local buyers—it is a cheaper alternative to expensive high-rise units. Boreys are highly-anticipated by the wealthy Cambodians in Siem Reap and Phnom Penh, as indicated in Knight Frank’s 2018 half-year report.

As a result of high demand for premium residences and the increasing land values, construction activities in Cambodia have been continuous and do not appear to be slowing down despite the pandemic. In fact, the condominium development projects has not been postponed during pandemic. Based on the Q3 2022 market report of CBRE, there were over 900 units of condominium projects resumed their operations in 2022.

As of Q2 2020, the total number of existing condominiums is 21,935 in Phnom Penh. This number would go up to a total of 53,512 condo units in Phnom Penh between 2020 and 2023 due to the 5,611 units scheduled for completion post-2023. The future supply is projected to comprise predominantly of Mid-Tier condominiums, with hope to balance the oversupply in the High-end segment.

Some buyers and investors, especially the first-timers, may be quite dubious about the idea of buying an expensive property that is totally not existing. There may be some risks, but so are the benefits from buying a pre-constructed property. So before jumping into the venture, it’s best to delve further on the advantages and disadvantages of investing in pre-selling properties, so as to arrive at a wise decision.

Check out the latest off-plan condo projects you can look forward to in Cambodia:

• Odom: The Newest Landmark along a prestigious street in Phnom Penh city.
• J-Tower 3: The Highest Quality of Living – The first condominium to rise with 77 floors.
• Time Square 306: The Most Affordable Investment in central BKK1, Phnom Penh.