Buying an off-plan property often begins with an attractive image, an architectural rendering that suggests a fully finished home, and an advertised price that encourages booking before construction is complete. However, the period between the advertisement and receiving the keys is not merely a waiting period; it is a contractual, financial, and construction journey involving multiple checkpoints, and risks may arise regarding the clarity of specifications, the regularity of construction, payments, delivery dates, and the quality of the unit upon receipt.
In the Saudi real estate market, off-plan sales and leasing activities are subject to regulations overseen by the General Real Estate Authority through the “Wafi” program, which aims to enhance transparency and disclosure and protect the rights of the parties to the contractual relationship.
However, the existence of a regulatory framework does not negate the importance of individual due diligence before signing, nor does it mean that every project carries the same level of risk. Therefore, buyers face several questions, including: Is the price reasonable? What exactly am I buying? How will my money be managed? And what can I do if the project is delayed or the unit differs from the agreed-upon specifications?
Advertising… Is the image shown what will actually be delivered?
The marketing phase represents the first point of contact between the buyer and the project; it is during this phase that the buyer’s expectations regarding the location, size, design, amenities, level of finish, and expected delivery date are formed. However, conceptual images and marketing designs alone are not sufficient to prove that all visible elements will be implemented exactly as shown.
The Executive Regulations for the Sale and Lease of Off-Plan Real Estate Projects stipulate requirements regarding marketing licenses, and the disclosure of the project’s status and future plans when collecting reservation fees under the license; they also specify the data to be included in the real estate projects database.
Buyer protection begins with verifying that the advertisement matches the project’s official information, checking the developer’s name and licensing status, reviewing the plans and written specifications, and not relying solely on verbal promises or promotional materials.
The risk during the advertising phase lies in the buyer basing their decision on a marketing image without reviewing the contractual details, only to discover later that some of the elements they expected are not included in the binding specifications.
Reservation and Contract Signing… Where Are the Actual Obligations Set Out?
After being convinced by the advertisement, the buyer proceeds to reserve the unit and sign the contract. At this point, marketing promises become obligations that must be clear and verifiable in the event of a dispute.
The elements the buyer must review include the unit’s description, size, and specifications; the payment schedule; the specified completion period; the delivery date; provisions regarding delays, compensation, and contract termination, as well as co-ownership arrangements in projects that include shared facilities and common areas.
This stage becomes even more important when the offer includes an estimated delivery date that differs from the binding date in the contract, or when the terms regarding specification changes and additional fees are not clear enough to the buyer.
Therefore, at this stage, the buyer should not sign a contract without reading its detailed terms, nor should they rely on sales correspondence instead of the approved contractual text.
The practical rule here is not to settle for the total price alone, but to understand what the price includes, what obligations may arise for the buyer later on, when each installment is due, and what rights apply in the event of delays or discrepancies in specifications.
Financial Payments… Are They Tied to the Project’s Progress?
Managing buyers’ funds is one of the most sensitive stages in off-plan sales projects, because the buyer pays for a unit that has not yet been completed, while the project requires continuous financing to carry out the work.
The executive regulations stipulate that amounts paid by buyers must be deposited directly into the project’s escrow account, and they regulate the mechanisms for disbursements from the account, including the documentation of disbursements and approval by the relevant authorities in accordance with established controls.
The regulations also allow the buyer or tenant to request access to the accounting records for their unit and require the developer to provide a copy within 10 business days of the request.
The existence of an escrow account does not mean that the buyer can withdraw their funds directly whenever they wish, or that a delay in completion automatically results in a full refund without further action; as regulatory and contractual mechanisms determine how to handle delays, defaults, and refunds.
The sticking point at this stage is either a failure to verify that payments are being transferred to the project’s designated escrow account, or a lack of understanding of the relationship between the payment schedule and the actual progress of the project.
The Construction Phase: When Schedules Deviate from Reality
The project may face implementation, financing, or operational challenges that affect its progress, but the buyer should not be discovering the problem for the first time as the delivery date approaches, since monitoring the project’s status and reviewing related reports helps determine whether implementation is proceeding according to the announced schedule.
The regulations establish mechanisms for monitoring project progress through reports issued by the consulting firm, the certified public accountant, and the bank, and allow the Authority to request periodic reports on the project’s progress in accordance with the circumstances and timeframes specified in the regulations, These include key indicators worth monitoring: actual progress in construction, announced changes to the plans, the clarity of communication with buyers, and the availability of up-to-date official information regarding the project duration and delivery date.
The absence of updates alone is not sufficient to prove that a project has stalled, just as the continued publication of marketing advertisements is not sufficient to prove that implementation is proceeding according to schedule. Therefore, a distinction must be made between official information, marketing statements, and on-site observations.
The problem buyers face at this stage is a lack of regular follow-up on their part, or reliance on general assurances that do not include a clear schedule of remaining work and an updated delivery date.
Delayed Delivery… What Rights Should You Be Aware Of?
Delayed delivery is one of the most sensitive scenarios, especially when the buyer has arranged for their family to move, or their lease to end, or has made financial commitments based on a specific date.
The implementing regulations distinguish between a delay and a default. According to Article 34, a developer is considered to be in delay if the project has not been completed by the end of the term without a reason beyond their control, and the Authority may grant them an extension of no more than one year, The article also addresses cases of default, including failure to complete the project after the expiration of the extension or a suspension of construction work for more than 180 days at any stage, unless the developer provides a valid reason accepted by the Authority.
Article 35 provides for compensation for delays not caused by reasons beyond the developer’s control. In developed land projects, compensation is determined by agreement between the parties and shall not be less than 2% of the annual sales value. For real estate units, compensation shall be determined by agreement between the parties and shall not be less than the fair market rent for the unit as assessed by a certified appraiser.
These provisions should not be understood as automatic compensation payable in every case of delay without regard to the circumstances, as their application is contingent upon the facts, cause, contract, and relevant statutory provisions.
In the event of a dispute regarding compensation or contractual obligations, the FAQs for the “Wafi” program clarify that recourse is to the competent courts or the Saudi Real Estate Arbitration Center, in accordance with the provisions of the contract signed between the parties.
The sticking point at this stage is that the buyer may wait a long time without documenting correspondence, reviewing the contract, or understanding the procedures available to them if the delivery date is missed.
Takeover… Does Completion of Construction Mean the Obligation Is Fulfilled?
Even after construction is complete, the purchasing process does not end simply with the handover of the keys; as the final inspection is essential to verify that the unit complies with the contract, plans, and agreed-upon specifications; to identify any defects that need to be addressed; and to ensure that the relevant documents and warranties are delivered.
The regulations require the developer to execute the project in accordance with the agreed-upon specifications and to provide the buyer with as-built drawings of the completed unit, as well as provisions for addressing defects in construction and finishes, including the possibility of taking action regarding amounts retained in the escrow account in accordance with regulatory requirements.
The FAQs for the “Wafi” program clarify that the warranty for construction work related to foundations, concrete, and insulation extends for 10 years from the date of unit delivery, and that the warranty for mechanical and electrical installations extends for one year from the date of delivery.
The buyer must document any observations in the acceptance report, request that defects be remedied in accordance with contractual and regulatory procedures, and retain copies of documents and warranties, rather than relying on verbal assurances.
Where does the gap lie between regulation and actual experience?
Regulations and rules make it clear that the off-plan purchasing process is not without safeguards: there is a project license, an escrow account, contractual obligations, mechanisms for monitoring implementation, and provisions regarding delays and defects.
However, the effectiveness of these safeguards for the buyer also depends on their ability to access information, understand the contract, monitor the project, retain evidence, and take timely action when a problem arises.
Therefore, the challenge is not limited to the possibility of project delays; it also includes the buyer’s ability to detect early warning signs, distinguish between marketing promises and written commitments, and understand the course of action to take if things do not go as agreed.
See also:
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