Buying future housing projects: risks and safeguards

Main risks

• Delayed or no handover: Many buyers pay 80–95% of contract value yet projects remain stalled for years. Even when handed over, poor construction quality or failure to issue ownership certificates due to the developer’s mortgage or administrative delays are frequent.

• Legal traps in contracts: Buyers often sign deposits or agreements with intermediaries who are not project owners. Many “template” contracts contain one-sided clauses that disadvantage the buyer, leaving them in a weak position in disputes.

• False or unlawful projects: Some “projects” are actually farmland or land without sufficient legal clearance. Developers may collect money through “reservation agreements,” “financial deposits,” or “loan contracts,” effectively illegal fundraising. In some cases, the project itself does not exist, yet the buyer remains liable for the bank loan.

• High upfront payments: Some contracts require buyers to pay 20–30% as “deposit,” far above the 5% legal limit, converting deposits into disguised down payments.

Warning signs

• The contracting party is a brokerage or subsidiary, not the actual developer.

• The agreement is labeled as “consultancy,” “service,” or “loan,” not a standard purchase contract.

• Early payments demanded exceed the lawful ceiling.

• Buyers are asked to “deposit to prove financial capacity.” This has no legal basis under the Civil Code and is often a cover for illegal fundraising.

Protective measures

• Only sign contracts directly with the project owner. Do not transfer money to agents or intermediaries.

• Verify key legal documents:
  • Official confirmation from the Department of Construction that the project qualifies for sale.
  • Land-use right certificate.
  • Approved 1/500 detailed plan and construction permit.
  • Completion record of the building foundation.

• Require a bank guarantee for the developer’s financial obligations. This ensures refund of payments if the developer fails to deliver on time.

• Carefully review contract clauses and seek independent legal advice. Professional review is a small upfront cost compared to potential losses.

Legal note
The Law on Real Estate Business prohibits developers from authorizing others to sign purchase contracts or receive deposits. Brokerage firms can only charge agreed service fees, not collect “deposits” tied to property value. Any disguised deposit through “financial proof” or “service contracts” risks being declared void, exposing buyers to loss of funds with little recourse.

Conclusion
Future housing purchases carry high risk if legal due diligence is skipped. Buyers must treat all non-standard contracts, large deposits, and intermediary demands as red flags. Independent legal verification and strict compliance with statutory conditions are the only effective safeguards.