Buying a New Development Property in South Africa: What You Need to Know

New development properties in South Africa offer genuine advantages including no transfer duty, NHBRC warranties and modern specifications. But they also carry risks that do not exist with existing homes. Research the developer thoroughly, understand what is and is not included in the price, and get pre-approved before you commit.

Bloemfontein's property market has seen a steady growth in new developments, particularly in areas like Crestone Hills, Lilyvale and the broader southern suburbs. Buying in a new development can offer excellent value, but the process is different enough from buying an existing home to warrant its own explanation.

VAT Instead of Transfer Duty

When you buy from a VAT-registered developer, you pay VAT at 15% instead of transfer duty. The critical difference is that VAT is included in the advertised purchase price. What you see is what you pay.

This means that on a new development property priced at R1.5 million, the R1.5 million is inclusive of VAT. No additional transfer duty is payable on top.

For an existing home at the same price, you would pay the R1.5 million purchase price plus transfer duty of approximately R8,700, plus attorney fees.

New developments are often more affordable on a total acquisition cost basis than the headline price comparison suggests.

What Is Off-Plan Buying?

Off-plan means purchasing before the property is built. You see plans, a show unit or a 3D render, and you commit to buying a specific unit or stand based on those specifications.

You typically pay a deposit of 5% to 10% to secure your unit. The balance, financed through your home loan, is paid on transfer once the building is complete.

Off-plan buyers often secure lower prices than those who buy once the development is finished, because developers offer early-bird pricing to fund construction and generate sales momentum.

The Risks of Off-Plan Buying

Developer insolvency -- if the developer runs into financial difficulties during construction, the project may stall or fail entirely. Check the developer's track record and financial standing before signing.

Delivery delays -- construction almost always takes longer than the developer's initial estimate. If you are renting, plan for the possibility of a six to twelve month delay beyond the projected completion date.

Specification changes -- the finished product sometimes differs from the plans and specifications you signed. Ensure the sale agreement is specific about finishes, inclusions and specifications.

Market changes -- if property values fall between signing and transfer, your bank may value the completed property below the purchase price. Your bond would only be approved against the lower valuation.

What to Check Before Signing

Developer credentials -- how many developments has this developer completed? Are there existing owners in previous developments you can speak to? Is the developer registered with the NHBRC?

Municipal approvals -- are all plans approved? Has the environmental impact assessment been completed where required? Is bulk infrastructure in place?

The agreement of sale -- what is and is not included in the purchase price? What are the penalty provisions for late delivery? What happens if the development does not proceed?

Body corporate levy estimate -- for sectional title developments, what is the projected levy? This affects your affordability calculation.

Completion date and occupation date -- when does the developer project completion? When can you take occupation? What occupational rent will you pay if you move in before transfer?

How Home Loans Work for New Developments

Banks approve home loans for new development purchases, but the formal bond is typically only registered once the building is complete and can be valued.

This means your pre-approval must remain valid until transfer. Most pre-approvals are valid for 90 days. For an off-plan purchase with a 12-month construction period, you will need to renew your pre-approval closer to the anticipated completion date.

We manage this process on your behalf and remind you when renewal is needed.

Get pre-approved now or WhatsApp Melinda to discuss a specific new development you are considering.

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