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Buying off-plan property in the Dominican Republic is an attractive strategy for international investors looking to maximize their return on investment. This type of acquisition offers the possibility of obtaining lower prices before the development is fully built, with the potential advantage of an increase in value once the project is complete. CONFOTUR LawIn addition, this type of investment can be even more attractive by significantly reducing the tax costs associated with buying and owning a property. However, there are some key aspects to consider before investing in off-plan property in this Caribbean country. Here is a detailed guide on how to do so, including legal requirements and tax incentives.
1. Why invest in off-plan properties?
Investing in an off-plan property in the Dominican Republic has several advantages, such as:
- Lower pricesBy investing at an early stage of development, you can access lower prices compared to the value the property will have once completed.
- Increase in the valuationThe value of the property generally increases as the project progresses, allowing you to realize a capital gain even before the property is ready.
- Customization optionsMany developers offer buyers the ability to customize some aspects of the property's design or finishes.
- Payment facilitiesOften, developers offer staggered payment plans during construction, which reduces the need to pay the full amount immediately.
2. Off-plan property purchase process
The process of acquiring an off-plan property follows a different path than purchasing a finished property. Here are the most important steps:
a. Project selection
It is essential to research and choose a reliable project, developed by a company with experience and a good reputation in the market. Be sure to check the developer's background, including previous projects and the quality of their construction. Areas of high tourist growth, such as Punta Cana, Cap Cana, and Bávaro, tend to be very attractive for this type of investment.
b. Reserve Agreement
Once the project has been selected, you will have to sign a stand-by agreement. This involves making an initial deposit (usually between 10% and 20% of the total value of the property) to secure the unit you wish to purchase. This agreement is essentially a commitment to purchase, so it is important to review it with an attorney.
c. Signing of the Promise of Sale Contract
After the reservation, you sign a Promise of Sale Agreement. This document details the total price, payment schedule, delivery dates and penalties for non-compliance. Here it is critical to ensure that the contract clearly states the construction schedule, delivery dates and final features of the property.
d. Staggered payments
Developers generally offer payment facilities that are spread over the construction period. A typical example would be:
- 10%-20% when signing the promise of sale contract.
- 30%-50% during the various phases of construction.
- 30%-50% at the time of delivery.
This allows you to spread the cost over time, rather than making a one-time payment at the time of purchase.
e. Delivery of the property
Once the construction is finished and all inspections are completed, the property is handed over. At this point, you must verify that everything is in accordance with the plans and the sales contract.
What is CONFOTUR and how does it benefit international investors?
CONFOTUR is the Law for the Promotion of Tourism Development (Law 158-01), designed to promote investment in tourism projects in the Dominican Republic. Under this law, approved projects receive a series of tax incentives that directly benefit international investors. These incentives include:Real Property Transfer Tax Exemption (3%): Buyers of properties in CONFOTUR-approved projects do not have to pay the transfer tax, which represents a significant savings on the purchase of a property.Real Property Tax Exemption (IPI): For the first 15 years, properties under CONFOTUR are exempt from the annual 1% tax on the value of the property, which reduces the maintenance costs of the investment.Rental Income Tax Exemptions: Income generated from the rental of properties within CONFOTOTUR-approved projects can benefit from tax exemptions, which increases the return on investment.These tax benefits make CONFOTOTUR an excellent opportunity for investors seeking to minimize costs and maximize the return on their investment in the Dominican real estate sector.4. Migratory Benefits for International Investors in the Dominican RepublicThe Dominican Republic not only offers attractive real estate investment opportunities, but also provides migratory advantages for investors. One of the most popular options for international investors is the Residency by Investment program. This allows those who make a significant investment in the country to obtain Dominican residency. Among the requirements and benefits are:
a. Requirements to obtain Residency by Investment
Minimum investment: The minimum amount required to qualify for investment residency is USD $200,000. This investment can be made in real estate, tourism projects, commercial enterprises or in the stock market.Types of investment: Investments can be direct in the real estate sector (such as the purchase of properties), or indirect, such as shares in companies registered in the Dominican Republic or in trusts approved by the government.
b. Investment Residency Benefits
Fast residency: The residency by investment program offers an accelerated process to obtain residency, generally in less than six months, which is considerably faster than other types of residency.Ease of obtaining nationality: After two years as a resident, the investor can apply for Dominican nationality, which allows access to more benefits, such as free mobility within the Caribbean region and visa waiver agreements with other countries.Access to local services: Legal residents have full access to the public and private health care system, in addition to other state services.Facility for family: Investors who obtain residency by investment can also include their spouses and dependent children.Access to local services: Legal residents have full access to the public and private health care system, in addition to other state services.Family-friendly: Investors who obtain residency by investment can also include their spouses and dependent children in the program, which facilitates family relocation.Buying off-plan property in the Dominican Republic can be a smart investment if done with due diligence. The country's real estate market offers opportunities for high profitability, tax and immigration benefits, especially in booming tourist areas. However, it is essential to have the support of local professionals, such as a lawyer and a trusted real estate agent, to ensure that your investment is protected and as profitable as possible. With the growth of tourism and the constant demand for property, this type of investment can offer great long-term benefits.
