With many off-the-plan developments taking years to complete, buyers might want to reconsider how much deposit they put down on a flat they won’t occupy for a long time.

Under the Sale of Land Act, a deposit cannot exceed 10 per cent of the purchase price of an OTP unit but that doesn’t mean the deposit must be the full 10 per cent.

The tight funding requirements banks impose on developers as a result of the global financial crisis mean it is taking longer for an OTP project to get from the sales stage to the start of construction.

Many buyers must now wait three — even four — years to take possession of a unit, depending on the term set in the contract of sale.

On a $500,000 apartment, that typically involves handing over $50,000 as a deposit on a deal that can take years to conclude.

Buyers should check whether a developer will accept a smaller deposit; if they will, the buyer can then invest the remainder more profitably in the meantime.

Developers may, however, insist on taking the full deposit as it might be a precondition for getting their own financing for the project.

Buyers should also seek approval from their bank before taking this step.

Story by Chris Vedelago, domain.com.au