How it works
Developers in the UK real estate market who have an off-plan sales strategy are often met with resistance because of a lack of protection offered on potential investor deposits.
Historically, this was provided within the developers latent defects policy. However, it was limited to only 10% or upto £100,000 per unit whichever was lesser. This means that it made selling units off plan for challenging for developers.
Most prime or large scale residential developments are under-insured when it comes to loss of deposit. To solve this problem for our clients, we are able to provide a loss of deposit bond which will allow developers to use these deposits to fund the development.
Loss of deposit cover is a type of surety that allows a property developer to release and utilise any deposits for residential units purchased off plan whilst providing assurance to the purchaser that their deposit is secure.
Additionally releasing funds this way can be a far more cost effective solution than traditional development finance and is therefore an attractive proposition for well established developers.
The Benefits
Covers loss of deposit for potential purchaser
Allows developer to release and reinvest any off plan deposits
More cost effective than borrowing from a financial institution
Security for the purchaser
Cash flow for the developer
Can be purchased before work has commenced or during build period
We provide a facility up to an agreed amount that you can draw down as and when required
Insurer will pay in the event of default by the developer
Example of Use
A project of 100 units in central London with a GDV of £200m (approx. £2m each) needs release of deposit cover. It is anticipated that 50% (50 units) will sell off plan generating deposits of £10m (at an average 10%).
The developer is able to use the funds for construction purposes and by providing deposit release cover to the purchaser gives assurance that if the developer ceases to trade the purchaser will be refunded their deposit.
If the developer had gone to a bank to borrow the £10m it would have cost at least 6%, by using deposit release cover it can cost only 3% generating a saving of £200,000.
About London Belgravia Brokers
London Belgravia Brokers provides insurance solutions to global property developers and professionals working within the UK real estate market. We are authorised and regulated by the Financial Conduct Authority so our clients can be assured of best in market advice at all times.
Our Team has in excess of 20 years’ experience in the sector Obtaining specialist property insurance and can be a difficult process with lots of form filling, additional questions from insurers and time spent chasing an actual quote.
We take away that pain by managing the process for you and ensuring you receive the best price for the most appropriate cover to meet your requirements.
We see our role as an independent advisor who reviews the merits of each policy to help our clients make well informed decisions.
We are now established as the UK property markets go-to broker for construction insurance and finance.
Our ethos is based around outstanding customer service. Obtaining specialist property insurance can be an arduous process. We take away that pain by managing the process for our clients and ensuring they recieve the most appropriate and commercially attractive solutions.
