POTENTIAL RISKS OF ALLOWING EARLY RESERVATION DEPOSITS FOR OFF-PLAN HOUSING

A proposal to allow property developers to collect reservation deposits from buyers before projects officially qualify for sale is drawing attention from industry observers. While the proposal is expected to ease financial pressure on developers, experts note that it may also introduce new challenges for market transparency and buyer protection.

Under the current draft of the amended Law on Real Estate Business, developers are generally permitted to receive deposits only after residential projects have satisfied the legal conditions required for commercial sale. During the consultation process, however, some industry representatives have suggested allowing developers to collect a limited reservation deposit, up to 5% of the property's value, once a project has received investment policy approval and investor recognition.

Supporters of the proposal argue that developers often face significant upfront expenses during the early stages of project preparation, including land acquisition, financial obligations, and legal procedures, while having limited access to customer funding. Allowing a modest deposit could help improve cash flow and provide additional financial flexibility before projects officially enter the market.

Some market participants also believe that an early reservation mechanism would enable developers to better assess customer demand, optimize product planning, and adjust development schedules accordingly. Buyers, meanwhile, could have the opportunity to reserve preferred units and secure pricing earlier in the project cycle.

However, other experts caution that permitting deposits before projects meet all legal sales conditions could increase risks for homebuyers. If projects encounter delays or fail to complete required legal procedures, purchasers who have already placed deposits may face greater uncertainty regarding delivery timelines and contractual protections.

Industry analysts also note that the real estate market has previously experienced various forms of early reservation programs, such as booking fees, priority registration, or service fees, before projects were officially eligible for sale. Some observers believe that introducing a formal early-deposit mechanism could blur the distinction between legitimate reservations and premature capital mobilization if not accompanied by strict regulatory safeguards.

Another concern is that early reservation activities may encourage speculative behavior. If reservation rights become transferable before official project launches, some investors could seek short-term gains by trading reservation positions, potentially contributing to price inflation before homes are formally available for purchase. Such dynamics may create additional challenges for genuine homebuyers seeking affordable housing.

During the consultation process, the drafting authority acknowledged these concerns, noting that allowing deposits during the project preparation stage could result in customer funds being collected before projects satisfy all legal requirements. According to the draft explanation, the existing regulations were originally designed to strengthen market discipline, improve transparency, and reduce risks associated with premature fundraising activities.

The proposal remains under review as authorities continue gathering feedback from stakeholders. The final provisions of the amended law will depend on the legislative process and the balance between supporting project development and ensuring adequate protection for homebuyers.