Unfinished property in Spain: risks and important details.

Risks and Features of Buying Off-Plan Property in Spain

Buying off-plan property in Spain is a relevant, but complex, investment option. On the one hand, you can save on the price and get a house or apartment fully adapted to your needs. On the other hand, there is a risk of construction delays, financial problems for the developer, and potential legal difficulties. Below we analyze the main advantages, risks, and important points to pay attention to when buying a property under construction.

Advantages of Acquiring an Off-Plan Home

Savings at the Initial Stage

The main reason many buyers choose off-plan housing is the lower cost at the time of purchase. Developers often offer attractive prices to attract investors even at the excavation stage. After the completion of construction, the market value of the property, as a rule, increases, which means there is an opportunity to make a profit.

Custom Layout Options

Buying off-plan allows you to partially or completely influence the interior design. You can choose finishing materials, color schemes, and, if necessary, make changes to standard architectural solutions (if the project allows it). This "customization" gives you the chance to create a space tailored to your needs from the very beginning.

Compliance with Modern Standards

New property in Spain meets the latest requirements for energy efficiency and safety, provided for by the Building Management Act (LOE). In addition, developers often build residential complexes with swimming pools, gyms, green areas, and playgrounds, which positively affects the comfort of future residents and the value of the property.

Main Risks of Buying Off-Plan Property

Probability of Delays and Financial Problems

No project is immune to delays. Problems with the supply of materials, changes in market prices, legal delays – all this can postpone the completion of construction. If the developer has serious financial difficulties, the project may be frozen. Therefore, it is important to check the company's reputation in advance, study its previous projects, and make sure that it is able to fulfill all its obligations.

Changes in the Project and Market Fluctuations

Although buying off-plan provides an opportunity to personalize your future home, sometimes the developer may make unforeseen adjustments to the project, limiting your original ideas. Additionally, it is worth considering the risk of fluctuations in the real estate market. If the market situation changes against you, the final cost of the apartment or house may be lower than expected, and resale may be less profitable.

Legal Aspects and the Need for Thorough Verification

When buying off-plan housing, you need to check whether all necessary permits and municipal licenses have been issued. In some cases, to obtain documentation, you need to make a request through the Freedom of Information Act (FOIA), which can take an indefinite amount of time. If construction is partially completed without the appropriate permits, difficulties may arise later with commissioning. In addition, it is worth studying the terms of the contract and clarifying how the refund of advance payments is made if the project is not completed.

What to Pay Attention to Before Signing the Contract

Developer Reputation. Study the company's completed projects and check reviews from other buyers.
Contract Terms. Pay attention to deadlines, guarantees, and penalties for non-fulfillment of obligations.
Construction Guarantees. Spain has a set of mandatory guarantees, including a guarantee for structural defects for up to 10 years.
Accurate Cost Calculation. The total amount includes Value Added Tax (VAT), notary and registration fees, and additional commissions.
Payment Plan. Usually, the buyer pays a certain amount (10-30%) when signing the contract, then pays the rest in stages, up to the handover of the keys.
Location and Infrastructure. Even if you like the project, check what schools, shops, hospitals, and other facilities are nearby.
District Prospects. Find out if there are any plans to change the urban environment that could affect the value of the property.
Bank Guarantee. Request confirmation that deposits or advance payments are held in a special account protected from the developer's financial risks.

How and When to Apply for a Mortgage for Off-Plan Housing

Experts recommend applying for a mortgage about 2-3 months before the official handover of the keys. If you start this process too early, your solvency may change during the construction period, and the mortgage rate may increase. Often, developers cooperate with banks, offering buyers special lending conditions. However, it is worth comparing offers from different banks to find the most advantageous option.

Possible Types of Loans

Construction Loans. Obtained by those who buy housing in the process of construction. Payments are made in stages, as each major stage of construction is completed.
Renovation Loans. Relevant if you are buying an almost finished house where you only need to make repairs or minor changes.
Federal Housing Administration (FHA) 203(k). Offered for properties requiring major rehabilitation, but this option is more often used in the US.
Bridge Loans. Used by buyers who need to wait for the sale of their current property to raise funds to buy a new one.

Payment Process and Construction Stages

Buying off-plan in Spain usually involves a phased payment schedule. When concluding a purchase agreement, an initial deposit is made (about 10-30% of the value). Further payments are divided proportionally to the stages of construction. When the object is completely ready, the buyer pays the remaining amount at the notary and receives the keys.

Important Points When the House is Partially Completed

If you decide to purchase a property that is already partially built, make sure that all permits are in place and that the house is put into operation on time. It is advisable to request an inspection: it often happens that due to the lack of Heating, Ventilation and Air Conditioning (HVAC) or unfinished electrical work, the house cannot be put into operation.

How to Guarantee Quality and Compliance with Standards

The developer in Spain is obliged to provide guarantees for the structural integrity of the building for 10 years. Also, the Building Management Act (LOE) provides a two-year warranty for engineering systems - plumbing, wiring, etc. If serious defects occur - cracks in the load-bearing walls or leaks - the developer is obliged to eliminate them at his own expense. That is why it is important to keep all documentation, including advertising brochures and a list of materials used. All this data has legal force in case of disagreement.

Practical Advice Before Buying Off-Plan

Check Family Plans. Think about how the size of your family might change, whether you need extra space or, conversely, a smaller apartment.
Analyze Market Value. Compare offers in the same area, do not rely solely on the words of the developer.
Ensure Payment Security. All contributions must be insured or held in a special account to which the developer has no access.
Require an Inventory of Materials. Before construction begins, ask the developer to provide a list of materials and finishes to be used.
Include a Clause on Unforeseen Circumstances. If construction is stalled due to a lack of a license or due to the developer's financial problems, you should have the right to terminate the contract and get your money back.
Conduct a Full Inspection. Before signing the transfer deed, request an inspection of the object, make a list of shortcomings so that the developer can eliminate them.

Conclusion: How to Make an Informed Decision

Off-plan property in Spain can be a profitable investment option or a solution to the housing issue if precautions are taken. It is important to study the legal, financial and technical aspects of a particular project, ask the developer all the questions you are concerned about and, if necessary, consult independent specialists or lawyers to minimize risks. A competent approach will allow you to get modern and high-quality apartments that will meet your expectations and the construction standards adopted in Spain.