Buying a property off the plan can be an attractive option for home buyers and investors. You may be able to secure a brand-new property at an agreed price today while having additional time to prepare financially before settlement.

However, buying a property that hasn’t been built yet also comes with risks. Recent events involving property developer **Bathla Group**, which entered voluntary administration, have highlighted some of the uncertainties buyers can face when purchasing off the plan.

For some purchasers, this can mean uncertainty around deposits and whether projects will proceed. For others, particularly where construction has already commenced, questions may arise about how and when a project will be completed.

While every development and contract is different, the situation is a useful reminder that buyers should understand both the potential benefits and risks before signing an off-the-plan contract.

## What Does Buying Off the Plan Mean?

Buying off the plan generally means purchasing a property before construction has been completed, and sometimes before construction has even started.

Instead of inspecting the finished home, buyers may make their decision based on architectural plans, floor plans, specifications, display apartments, renders and information provided by the developer.

Settlement typically occurs after construction is completed and the property is ready for settlement, although the exact arrangements depend on the contract.

This means there can be a significant period between signing the contract and actually settling on the property.

## Potential Benefits of Buying Off the Plan

There are several reasons buyers consider purchasing off the plan.

### 1. Securing a Property at Today’s Price

One potential attraction is agreeing to purchase the property at a price when the contract is signed, with settlement occurring later.

If property prices increase during the construction period, the buyer may benefit from having secured the agreed purchase price earlier.

However, property values can also move in the opposite direction, which is an important risk to understand.

### 2. More Time to Prepare

Because settlement may be months or even years away, buyers can have additional time to save for costs associated with the purchase.

This can include building up savings, reducing debts or preparing for other expenses associated with moving into a new property.

### 3. A Brand-New Property

Off-the-plan purchases can provide access to newly constructed homes or apartments with modern layouts, fixtures, appliances and other features.

For some buyers, purchasing a new property can also mean less immediate maintenance compared with an older property, although this will depend on the individual property.

## The Risks You Need to Consider

The potential benefits need to be weighed against the risks.

### The Finished Property May Differ From Expectations

Plans, renders and display apartments can provide an indication of what the completed property may look like, but the finished product may differ in certain respects.

Buyers should carefully review the contract and specifications to understand what is included and what changes may be permitted.

### Construction Delays

Construction can take longer than originally anticipated due to a range of factors, including planning issues, construction difficulties, labour availability, supply issues or other circumstances affecting the development.

A delay can have flow-on effects for your personal finances, accommodation arrangements and timing of your loan.

### Property Values Can Change

One of the key considerations is that the property may be worth more or less by the time construction is completed.

This is particularly important from a finance perspective.

For example, if you sign a contract for $700,000 but the completed property is valued at $650,000 before settlement, your lender may assess the loan against the relevant valuation and lending criteria at that time.

This could mean you need to contribute additional funds to complete the purchase.

### Changes to Your Financial Circumstances

Your financial circumstances can also change between signing the contract and settlement.

Your income, employment, existing debts, expenses and other financial commitments may be different when the lender assesses your application closer to settlement.

Loan policies and lending requirements can also change during the construction period.

This is why obtaining finance approval or having a finance discussion at the beginning of the process does not necessarily guarantee that the same finance will be available at settlement.

## Developer Risk Is Another Important Consideration

When purchasing off the plan, you’re not only buying a property — you’re also relying on the developer and builder to deliver the project in accordance with the contract.

Recent events involving Bathla Group have highlighted the additional uncertainty that can arise when a developer experiences financial difficulties.

Depending on the circumstances, buyers may have questions about whether a development will proceed, whether construction will be completed, what happens to deposits and what their rights are under the contract.

These issues can be complex and are highly dependent on the individual contract and circumstances.

### Research Before You Sign

Before entering into an off-the-plan contract, consider researching:

* The developer’s previous projects and track record
* The builder involved in the development
* The development’s construction timeline
* The contract terms and conditions
* Deposit arrangements
* Sunset clauses and other important contract provisions
* What happens if construction is delayed or the project changes
* Your rights if the development does not proceed

Independent legal advice can be particularly important because a property contract can contain significant obligations and conditions.

## Don’t Leave Finance Until Settlement

Finance should be considered early in the process — not just when construction is nearly complete.

A broker can help you understand your borrowing position and discuss potential lending options based on your circumstances.

For an off-the-plan purchase, it’s also important to recognise that the situation can change between the initial application and settlement.

Your income may change, you may take on additional debt, lender policies may change, interest rates may move, or the final property valuation may differ from the original purchase price.

Planning ahead can help you understand what may be required when settlement approaches.

## What Should You Do Before Buying Off the Plan?

Before signing an off-the-plan contract, consider taking these steps:

**1. Understand the property**
Review the plans, specifications, inclusions and expected completion timeframe.

**2. Research the developer**
Look into their experience and previous developments.

**3. Get independent legal advice**
Have a qualified professional review the contract and explain important clauses and obligations.

**4. Understand your finance position**
Speak with a broker or lender early to understand your borrowing capacity and potential loan options.

**5. Plan for changes**
Consider what could happen if your circumstances change or the property valuation comes in lower than expected.

**6. Keep your finances in order**
Avoid taking on unnecessary new debts or making significant financial changes without considering how they could affect your future borrowing position.

## Thinking About Buying Off the Plan?

Buying off the plan can offer opportunities, but it also requires careful planning because there can be a significant gap between signing the contract and settlement.

Understanding the contract, researching the developer and getting legal advice can help you make an informed decision. From a finance perspective, having an early conversation can also help you understand your borrowing capacity, potential lending options and what you may need to prepare for settlement.

At **Sunny Finance**, we can help you work through the finance side of your property purchase and prepare for the next steps.

📞 **0424 194 688**
🌐 **sunnyfinance.com.au**

*Terms, conditions, fees and charges apply. Applications are subject to credit approval.*