Payment Schedules for New Build Apartments

Why buy an under-construction property

As it happens in other parts of the world, it is possible to buy a property off plan in Germany. Understandably, some potential investors may be reluctant to buy a property that isn’t finished, but once you are familiar with the process, there’s no reason to be doubtful. In fact, there are some benefits involved in buying this type of real estate. Buying a property that’s still under construction can be cheaper than buying an existing one. In the majority of cases, you will be dealing directly with the developers, who often offer prices below market value during the initial stages of the construction project. Because of the lower purchase price, returns on investment can be significant by the time the property is finished. There are several payment options available in case you can’t buy the apartment upfront. New build properties are funded through stage payments. This means that a certain percentage of the total property price becomes due at different stages of the construction process.

Understanding new-build payment schedules

If you want to buy an apartment under construction, you will need to follow a few steps to ensure the transaction goes ahead smoothly. First, the project developer will require a deposit. This is standard practice and guarantees the specific unit you have chosen is taken off the market. The deposit counts towards the total property price. Settling the deposit entails some legal procedures and documentation, so it’s strongly recommended to get the help of a lawyer or a notary. After paying the deposit, you will need to make a number of payments, which are expressed as percentages. Below you can find an overview of the payment schedules and the corresponding construction stages:

• Approximately 30% is due when the construction project starts (when ground is broken). This is considered your deposit payment.
• A further 28% when the entire building frame or shell is finished.
• Between 12% and 13% when roofs, windows, and gutters are fitted.
• Roughly 10% is due after some internal installations are complete (sanitary, electrical, heating, and wall plastering).
• Another 4% when the floor screed and facade works are done.
• Approximately 11% one all plumbing is complete and the property is handed over from the developer to the buyer.
• After you have the keys, there may be another small payment (around 3%) to account for all outdoor amenities and fittings.

You will notice from the above that some of these stages combine different milestones. A developer can lay out a payment schedule slightly different from the one outlined here, but the important thing is that you should not be asked to make more than 7 payments in total.

Are payment schedules secure?

All payments are protected under a German regulation known as Makler- und Bauträger Verordnung, which is often abbreviated to MABV. This ordinance is part of German real estate law and among other things, it stipulates the following conditions:

• Developers can only use money received from buyers for tasks related to the construction project.
• The funds must be kept separate from the developer’s personal assets.
• Payments are scheduled according to the progress of the construction project. This means that the developer can’t ask for payment unless the corresponding stage is complete.
• If the conditions specified in the sales contract aren’t met, the developer can no longer continue to require payments.

For better protection, the sales contract should specify what happens if construction is delayed. For example, if such clause is part of the contract and the property isn’t finished on the due date, the developer may need to offer financial compensation to the buyer. As you can see, the payment schedule system in Germany is mostly secure. Having said that, it never hurts to do your due diligence and only buy from developers that have a good track record and reputation.