Prices for apartments in Kiev — one of the highest in Ukraine. Every year the number of capital buildings is increasing, but the cost of housing is not reduced. According Lunia the average price of one square meter of housing in the last year increased by 1 thousand and now stands at 22.3 thousand UAH.
Immediately pay the full amount for the new housing under force far not every Ukrainian. And here is becoming more popular another option is the apartment in installments.
The main features of installment — no interest and the full payment in a relatively short period of time — from one to three years before entering the house in operation. However, due to high competition among developers, buyers are trying to attract even more favorable conditions for the purchase of housing. Among such proposals — long term installment for an apartment for 5-10 years.
How profitable to buy housing on such terms and on what to pay attention to buyers?
How is the market
The installment is a payment method where the buyer splits the cost of an apartment for a few payments and disburse them during the construction of the residential complex. Until the completion of the installment interest-free, and after all the payments begin to accrue interest. This payment is in high demand among Ukrainians.
According to Lunia that 224 residential complex (LC) of the 290 existing offer to buy the apartment in installments. Of these, 104 LCD, offer a loan, the 85-year there are two proposals (credit and installment).
The most common method of payment is purchasing through intermediaries: funds construction financing (CFF) or the collective investment institutions. They are responsible for the results and all financial transactions between the buyer and the developer.
These intermediary structures provide financial and legal support of the process. Instead, the FSF may be a Bank that grants the buyer credit for housing.
Recently on the market appeared new offers — installment plan for 5-10 years from the developer.
Long installment — what is it?
The procedure of home buying on long-term installments as follows. The buyer enters into a preliminary contract of sale, after which it begins to pay monthly a percentage of the total cost of housing.
Typically, the minimum down payment — 10% of the cost of housing, and further contributions determined by a formula that every developer expects on their own. The monthly price per square meter can be pegged to the dollar or the Builder himself can enter the factor from the amount paid.
The key principle is that the more the down payment, the cheaper in the future will be square meter.
“The longer the installment plan, the higher the payoff amount. The maximum rise is 30% of the apartment cost, but the average is 10-15% of the amount of the cost of housing,” — says commercial Director of the company “Integral-Bud” Anna Laevskaya.
It is also important that unlike the Bank, the developer does not require detailed reporting on the income of the investor and such long-term installments are given to all.
Some developers have a requirement to pay 50% of the price until the end of construction. The remaining amount can be spread out over 10 years or more.
“The level of solvency of the buyer is checked in a period when it pays the first 50% of the cost to enter the house in operation,” — says Anna Popruga, a company spokesman KAN.
Also contract long term installment are mandatory insurance payments. The size of insurance payments of 0.3% of the value of housing per year. So, if payment in instalments is issued for 5 years for insurance need to pay 1.5% of the property value.
What gives? In case if the customer is going to have an accident, the insurance company will repay the outstanding amount of the rent.
According to the calculations of developers, including all additional payments the buyer will overpay for housing by 1.5 times.
If you sign a contract with the Bank, the interest rate on long-term installments will be about 22%, which is twice the rate offered by the Builder under the same conditions — 7-8% per annum.
Such a long type of installment typically can afford the company with greater liquidity of the business. If the developer has sufficient funds for the construction and not depend on the contributions of the investors, then it can offer long-term installments without financial risk to yourself.
The longer the installment plan, the higher the risk
Very often most of the proposals a long time — only element of the marketing sales strategies, which hides a lot of risks.
“It is rather a marketing move, since, according to developers, more than 80% of transactions take place without the installments,” — says the managing partner of URE Club Olga Solovey.
Cooperation does occur with the developer directly without financial intermediaries and attractive to the buyer conditions. The buyer enters into a preliminary agreement for the sale and only after payment of the full amount is signed the main contract giving the right to the registration of property rights to housing. But since the signing of the preliminary contract and before signing the main investor has no rights to the apartment, it is owned by the developer. The buyer is not an investor of this house, as it happens when applying for a loan through the construction financing Fund.
Developer prepares the right of ownership over, and then renew on the buyer. Legally call such activities payments on installment not.
First, de jure, is to buy on the secondary market where the original owner of the property is the developer. “In fact it is a hidden loan agreement”, — says the lawyer that manages a private law office Maria grabowska.
One of the biggest risks of transactions of this type, the likelihood that the developer will fulfill all commitments.
Second, a preliminary agreement of sale is actually a “letter of intent to purchase housing” and makes no warranties to the buyer. If for some reason the developer wants to terminate the contract with the investor, without explaining the reason, the buyer will not be able to appeal the decision.
“In fact, the developer can benefit from the facilities provided by the buyer during the construction, and then to terminate such a contract for various reasons, to return him the money paid, and to sell the already constructed housing at a higher market value,” adds Maria grabowska.
Thirdly, the developer insures itself against financial risks and tying monthly payments to the current exchange rate of the dollar. This means that the cost per square meter will rise or fall depending on the current exchange rate, and as a result, the amount of housing can significantly differ from the original.
The risks increase if the developer offers installments very attractive to the buyer terms, that is too cheap. The cost of materials and labour may rise again, will have to reconsider the price.
“The risks of unfinished construction of such housing and investment risks are much higher than the benefits supposedly cheap installment compared to legal credit,” said lawyer Maria grabowska.
What to do?
The first is to carefully study all the conditions and details of the contract.
To agree to such installments only if the developer has a good reputation and specific examples of successfully completed projects.
Great attention should be paid to the conditions of termination of the contract and currency risks for the buyer, because the more attractive looks for the buyer of the contract, the greater the probability that it is fraught with hidden surprises.