Residential and commercial real estate in Germany is popular among Russian-speaking investors. But over the last few years the emphasis has shifted from purchasing ready-made apartments to the construction and reconstruction segment.
Residential and commercial real estate in Germany: risks of development construction projects
Value-added projects, which include construction and reconstruction, allow for increased income from real estate investments. If the rent brings 4-6% per annum, then this option – all 8-15%. However, there are some nuances here. This type of investment is quite risky, so before taking up construction or reconstruction, you should take into account all the peculiarities to protect yourself from possible losses.
There is always a risk of failure in development projects in any country, and Germany is not an exception. There can be various difficulties on the way to such activity: refusal of financing from the bank, delay in issuing permits by the state services, rise in price of construction materials, decrease in the activity of selling objects. But despite the possible failures, Germany has created favorable conditions for investing money in this segment. The indicators of economic growth, reduction of unemployment and improvement of living standards are in favor of that. Here each stage of construction, sale and lease is regulated by the legislation.
The budget of 1-5 million euros allows you to build a house designed for 10-20 apartments.
Before you start a development project for residential or commercial real estate in Germany, you need to minimize the risks by thinking every step.
One of the main investor’s fears is receiving a refusal from the bank. Not all financial institutions in the country provide loans to foreign businessmen. Choose the banks that work with foreigners, each of them has its own requirements, but there are a number of the same. An institution can refuse a loan in the following cases:
- the project company is registered in the country, but has no credit history;
- full package of documents was not provided;
- the company has not passed the business legality check.
In this case, the bank has the right to refuse credit.
To begin work must obtain an urban development plan and building permit. The first document is sold along with the land plot, and the second is received from the architect. To obtain a permit you need 3-6 months, and the plan may take up to several years.
In the process of construction often arises force majeure, among which – additional costs that are not included in the estimate and failure to meet deadlines. In Germany, the developer is insured from such situations, thanks to clear rules of law. Here, when the estimate is made, each step is accurately calculated on the basis of DIN 276 standardization.