Should I buy:
– a commercial property which is under construction?
– or, a completed unit in the sub sale market?
To be fair, both under construction (UC) and sub sale units have their unique attributes. Each has their pros and cons as they are catered to different buyers with different objectives. So, what are your purposes for having a commercial property?
– a retailer seeking to have a retail presence?
– a business owner searching for an office space?
– an investor seeking immediate cash returns from renting commercial units?
– an investor seeking for properties that have growth potential over the long-term?
Your purposes will determine whether you should be hunting for a UC unit or a sub sale unit. If you are still undecided, it is best to find out their distinctions. In this article, I’ll share five key advantages for buying UC units over units in the sub sale market.
1: Theme & Latest Trends
Today, we are witnessing a shift in trends for newer commercial developments in the Klang Valley.
Unlike terraced shophouses, modern developers are more delicate as they include specific themes, the latest architecture and landscaping designs into their development plans. To name a few, they may include greeneries, water features and pavilions to enhance the overall appeal of their commercial units.
Also, developers are going the extra mile to manage the surroundings of these units upon completion. It includes the employment of advanced safety and security features, janitorial services, and other maintenance services to sustain the attractiveness of these commercial developments. Hence, this gives UC units in these integrated developments an advantage over older units in the sub sale market.
2: Choosing Desired Lots
This benefit is reserved for early buyers of UC units.
Often, they would take up UC units of excellent locations because as the initial customers, they have more choices. It is an advantage over buyers who decide to take up a unit at the latter stages of its development. This is a norm as early purchasers make their commitment first and would be financially tied up to their respective UC units until completion.
3: Lesser Defects with Warranty Period
If you buy a UC unit, you will be its first owner upon completion. You should expect lesser defects as it is brand new.
More importantly, your purchase of a UC unit often comes with a defect warranty period. It entitles you to request the developer to rectify any identifiable flaws in your unit over a given period. Usually, the period is for 12 months. However, the time may differ based on the project and its developer.
Overall, the defect warranty period is to protect you as you are buying a unit based on plans, models and even artists’ impressions. Still, it is more assuring for us to consider having UC units from branded developers as they possessed a proven track record for their execution, quality and commitment to deliver value to their buyers.
4: Discounts, Rebates & Goodies
For a start, it is the developer’s interest to sell UC units as quickly as possible. It ensures adequate financing for the developer to complete its project. Thus, if you are considering a UC unit, you should check out its sales package which might come with:
Early buyers often enjoy bigger and generous discounts for committing to a UC unit. Why? Firstly, developers may save up to millions of Ringgit in advertising costs for their projects. Secondly, it generates great publicity to developers if they enjoy high take-up rate for their projects. In turn, it may help to sell the remaining UC units in their project. Thus, if you have decided on a particular UC unit, it is to your advantage to take it up as early as possible.
Developers would receive progressive billings according to the stage of completion for their projects. In return, some of these developers may reward existing buyers with rebates for their customers’ commitment to a UC unit in their development projects. When coupled with the discounts mentioned above, the purchasers enjoy less cash outflow commitment as the approved loan margin might be adequate to finance a bigger portion of the total purchase price.
c. Free Legal Fees
Developers may absorb legal expenses for the preparation of the sales and purchase agreement (SPA) and the buyer’s loan documents. It is an advantage to you if you are a buyer of a UC unit as the legal fees to purchase a commercial property is hefty. In this situation, again, the purchasers get to enjoy a lower cash outflow commitment.
For instance, you are considering to buy a commercial property worth RM 2 Million. The total amount of legal fees for the two documents above works out to be RM 30,800. You will personally be paying for this sum if you are buying a sub sale property.
5: Less Capital Intensive
Buying a UC unit is less capital intensive as compared to getting a unit from the sub sale market. To name a few, this is because:
a. Down Payment
Buyers have to make the full down payment if they purchase units from the sub sale market. If the commercial property unit is worth RM 2 Million, the minimum down payment is 15% which works out to be RM 300,000. It is not applicable to buyers of UC units as they are billed progressively according to the units’ stages of completion.
b. Loan Instalments
Purchasers will begin to service the full loan instalments if they purchase units from the sub sale market. Meanwhile, buyers of UC units would service their payments partially based on the units’ stages of completion.
c. Repair & Renovations
Buyers of sub sale units may need to fork out additional upfront capital to renovate and refurbish their units, just to make it more appealing for potential tenants. It is remarkably true if you intend to run a business in your unit. For business owners, they would prefer less capital outlay if possible. So a new property will be more appealing in this case.
Let’s summarise these key points. By buying under construction properties, you will always get the first mover advantage and lower purchase price. Furthermore, the rebate, discounts, and free legal documents will ease your cash flow. As a result, most first-hand owners get to reap better appreciation value for their properties investment.
If I’m Considering an UC unit
I would begin my search with strategically located projects from reputable developers. Despite the advantages above, there are risks involved in buying UC units as they are still under construction. So it is critical for us to mitigate these risks by checking who the developer is and its track record. Reputable developers with years of relevant industry experiences have a brand to protect.
Let us say, we are assessing a unit at Sekitar26 Enterprise. It is a project under Paramount Property, which is easily accessible via six major highways i.e. KESAS, LKSA, Elite, LDP, NPE, and Federal Highway. So now, we have covered two things, the developer’s reputation and its location.
Next, we would check out its master plan, site plan, floor plan, potential tenant mix, security features, and of course, its pricing details or should I say, sales packages. If you are interested in inquiring more about Sekitar26 Enterprise, please kindly sign-up the interest form below:
This article is sponsored by Paramount Property, an award-winning developer with more than 35 years of proven track record in the property development industry in Malaysia. Some of their other notable projects include Paramount Utropolis in Glenmarie, Greenwoods in Salak Perdana, Kemuning Utama in Shah Alam, and Sejati Residences in Cyberjaya.