Investing in a property that's yet to be constructed might sound unconventional, but in Cyprus, it's a common practice. This approach allows developers to secure funding through the sale of properties before breaking ground, ensuring a continuous cash flow to cover construction costs. Buyers typically pay 25-30% upfront, with subsequent payments made as construction progresses. While this system has its risks, it has been a successful model in Cyprus for years, offering potential benefits to both developers and buyers.
In Cyprus, the real estate market operates uniquely, with developers often waiting to lay foundations until a portion of the properties are sold and a significant down payment has been made. This initial payment usually ranges from 25-30% of the total property cost. The remaining balance is then typically divided into three equal installments, each corresponding to a construction milestone: the completion of the shell, the roof and plaster, and finally, the interior finishes such as tiling.
When you commit to buying a property still under construction, you'll need to navigate a series of payments and legal processes:
It's crucial to engage a local solicitor familiar with Cyprus property law, which shares similarities with the UK legal system. Contracts in Cyprus are comprehensive, detailing the property specifications and establishing your ownership rights until the title deeds are issued.
In Cyprus, property construction often takes place on rural or previously agricultural land, resulting in a single deed for the entire development. Individual title deeds are only issued once the entire project is complete and all services are installed. This can lead to delays in receiving your title deeds, but the initial contract serves as a bridge, clarifying your ownership rights in the interim.
Before making any alterations to your property, be aware that changes must adhere to the original plans until separate title deeds are issued. Unauthorized modifications can affect the entire development's eligibility for title deeds. Additionally, be prepared for the property transfer tax, which is based on a sliding scale relative to the property's value:
These "hidden costs" are essential to consider when budgeting for your property purchase.
While the pre-construction purchase process in Cyprus is well-established, it's not without its challenges. The Cyprus property market has seen fluctuations, with the 2013 financial crisis significantly impacting property values and the banking sector. However, the market has been recovering, with a steady increase in property sales to foreign buyers, particularly from the UK, Russia, and China. According to the Department of Lands and Surveys, property sales to non-Cypriots accounted for approximately 39% of all sales in 2021, highlighting the island's appeal as an investment destination.
Investors should also be aware of the Cyprus Investment Programme, which, until its suspension in November 2020, offered citizenship to individuals investing in Cypriot real estate. While this program is currently not active, it has contributed to a surge in luxury property developments catering to affluent foreign buyers.
For those considering a pre-construction property purchase in Cyprus, it's essential to conduct thorough research, engage with reputable developers, and seek legal advice to navigate the unique aspects of the Cypriot real estate market. With careful planning and understanding of the process, buying a property under construction in Cyprus can be a rewarding investment.
For more information on the Cyprus property market and legal advice, consider visiting the Cyprus Bar Association and the Department of Lands and Surveys.
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