Home Loan Talk - Advantages of Buying Off-Plan

Private Property South Africa
Denise Simpson

There are distinct advantages to purchasing property off-plan from a developer, as the

developer has invariably had to comply with strict criteria laid down by the

banks in order to obtain finance.

If you decide to buy a new home or investment property off-plan, the great

benefit to you as the purchaser, is that you are assured of a quality product

that has been built in accordance with all current approved laws and practices.

Most developers acquire finance from a bank in order to fund their development

and begin selling off-plan. The banks are very selective as to whom they will

lend to, and about the type of developments they are prepared to approve loans

for. As a result, a lot of research is done by the bank on the geographic area,

the actual end product, the professional team and the developer's track record.

The strict criteria generally used by the banks in approving a loan for a new

development are as follows:

  • Infrastructure i.e. roads, electricity and water supplies. It is vital

    that these are available to the site. Considering the short supply of

    electricity at present, planning is very important.

  • Location, location, location! Does the proposed cost of the units meet

    the normal price of similar properties in the same area?

  • Proof of land ownership.

  • Erf description.

  • Form of ownership the properties are to be transferred into i.e.

    Freehold, Cluster or Sectional Title.

  • A full list of the professional team with a short CV for each member.

  • Number of units and how many phases.

  • Copy of Surveyor General Diagram, which shows the location of each unit

    plus its size and number.

  • Proof of registration of the developer with the National Home Builders

    Registration Council (NHBRC). Any builder the developer uses also has to be

    registered with the NHBRC. In addition, the developer will need to register

    the entire development and enrol every unit that is going to be erected.

  • Location Map and Site Development Plan.

  • Building Layout Plan showing building phases, unit numbers and sizes;

    plus floor plans of all unit types.

  • Building Specifications and Schedule of Finishes.

  • Price List and copy of Offer to Purchase Agreement.

  • Contractor should be registered on the bank's builders' panel, which

    proves that they have a good track record.

  • It is prudent for the developer to use an attorney that is well-known

    and who is also on the bank's panel.

All this information is given to the bank for assessment and consideration.

Although a bank may be happy with the product, it may choose not to overexpose

itself within a single development and opt instead to cap the percentage of

end-user mortgage bonds. In other words, one bank may advise the developer that

it will only accept 60% of the total bonds in a development.

Once the details have been ironed out, the development is loaded onto the bank's

system. The purchaser can then approach their bank of choice to apply for a home

loan. The process is quick and easy, as the ground work has already been done.

After this it is merely a matter of the bank needing to assess the client's

affordability, and thereafter the property assessment will be a simple desktop

valuation.

So all you'll to need to worry about is your choice of finishes!

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