Payment terms from a developer when buying an apartment under construction in Bulgaria: benefits and risks

When selling real estate under construction in Bulgaria, developers often offer payment by installments. Many buyers of houses and apartments consider it to be a convenient financial mechanism that allows them to plan expenses, save money and even receive profits. Most buyers are happy to use it when buying a property. But is the installment plan always an advantage? Is it possible that such payment terms may carry additional risks? Along with the Apart Estate experts we are trying to understand what kind of installment plans Bulgarian developers offer when selling apartments and what are the advantages and risks there.

Payment terms from the developer

One of the undoubted advantages of buying property under construction in Bulgaria is the opportunity to acquire it in installments. Most developers offer more or less similar conditions. They are valid when you buy a studio apartment, flat, or a house.

However do not assume that installments can be obtained for buying any property and on any terms. Most often, the possibility of installment payment is associated with the following restrictions:

• The installment plan is available only until the apartment is put into operation, i. е. before receiving Act 16. Accordingly, the payment terms depend on how much time remains until this moment. If you decide to buy an apartment at the stage of construction plans approval, then you can count on about 3 years. During these 36 months, you can pay installments, the amount and terms of which are determined in the contract. However, if the residential building where you bought a flat or studio apartment has already got Act 14, then the installment terms will not exceed 12 months.
• The general practice is that all payment obligations must be fulfilled prior to receipt of Act 16. In case of delay, the buyer will face high penalties.
• Before transferring an apartment to a buyer, the developer provides installments at his own expense and does not charge any interest. At the same time, it is almost impossible to get a discount on real estate. Price reductions are possible only in case of 100% payment.
• If you are interested in receiving installments after Act 16 is obtained, the construction company will send you to a certain bank, which will become your creditor. Usually this financial institution and the developer have some kind of an agreement. The bank will check your financial solvency and determine the terms of the loan of the residual amount. These conditions will include bank interest, insurance costs, and other mandatory fees.

Payment terms are always agreed on a case by case basis. The advance payment is usually 25-30%. The next payment of 30-40% is due upon receipt of Act 14. The last installment, which is the balance, is paid after Act 15, but before the commissioning of the residential building. 

Benefits of payment terms offered by the developer

Our agency works only with reliable developers; we help to buy apartments under construction in Bulgaria on individual favorable terms. An undoubted advantage of purchasing an apartment in installments through Apart Estate is the opportunity to use and plan finances more wisely. For instance, you do not have the full amount on hand, but there is an opportunity to earn it within a year or two, so you buy an apartment and gradually pay for it.

The next advantage is connected with the real estate’s price – there is no increase. When buying property in Bulgaria, you do not pay bank interest, insurance company fees, and other payments.

Payment terms allow you to protect yourself from the risks associated with construction delays. If the developer does not receive Act 14 and 15, you simply do not make next payments. If the developer is declared bankrupt and cannot continue construction, then you do not lose the full price of the apartment.

One more advantage is a possibility to sell the apartment while it is still under construction. The most favorable prices are valid when construction is in a process of approval or just started. They get higher after Act 14 and Act 15 is received, and reach a peak when buying a property from the developer at the stage of Act 16.

Purchasing an apartment in Bulgaria at the beginning of construction, and paying part of its price, you can resell this property and get a profit. The resale is carried out by obtaining the full price and covering the debt of the developer or by assigning the debt.

Risks

Since developers in Bulgaria insist on receiving full payment before Act 16, when buying a property in installments you will always face a main risk – a residential building will not be complete. It will be built, the apartments can theoretically be used, but you will not be able to get a document confirming that you are the owner of the finished and fully complete property. Moreover, you will be forced to pay for electricity at tariffs valid for legal entities, which are several times higher than for ordinary people. There is also a risk that you will not be able to obtain or extend the right to temporary or permanent residence in Bulgaria if applicable.

Be especially careful if the developer offers you to prolong payments terms for several years with the possibility of moving into a new apartment and living there. Such a proposal may be associated with the following risks:

• The developer does not plan to commission a residential building or complex in the near future. In some cases when not all apartments are sold, this is a way to delay the payment of taxes. Such a scheme can be used by developers of residential complexes in resorts.
• The contract will provide for a pledge of the apartment, which will make it impossible for you to sell it. The developer also may introduce other restrictions on the use of real estate. For example, you will not be able to rent it out or you will be forced to transfer the rights to rent it out to a management company.
• Payments upon receipt of Act 16 will include bank interest. The construction company will simply sell your debt to the bank and pledge the apartment.
• The next important risk that should not be forgotten is a change of the buyer’s financial situation. Due to loss of work, layoffs, wage reductions, the payment of installments may become impossible. If this is the case, you will need to take out a loan or sell the apartment in which you currently live to fulfill the contract terms. The refusal to buy a new apartment is associated with huge fines and, as a result, the loss of part of the amount which you have already paid.

The Apart Estate agency offers apartments from the developer in installments. The consultants of our agency will assist in negotiations regarding the price of apartments and payment terms. Contact us and we will select for you reliable real estate options under construction in Burgas, Nessebar, Sunny Beach, etc.