Regulating Real Estate Pre-Sales: Consumer Protection Without Hindering Investment

Pre-sales have long been a key financial mechanism for launching real estate developments. However, they have also become fertile ground for malpractices that, in some cases, have put buyers’ assets at risk and damaged the credibility of the industry. This situation has prompted local legislatures, such as in Nuevo León, to introduce initiatives aimed at tightening regulation of pre-sale activity.

One such proposal submitted to the Nuevo León State Congress includes, among other provisions, that developers must obtain a pre-sale permit issued by the relevant municipality and secure a guarantee bond in advance to protect buyers in the event of non-compliance. While the intention is valid,to protect consumers, these measures could have a significant financial impact on developers, particularly those operating with limited initial capital who rely on pre-sales as a key source of project funding.

If such regulations are implemented without proper technical and economic assessment, they could create unintended consequences: namely, a disincentive for investment. Private equity, institutional, and hybrid capital funds, when faced with higher compliance burdens and increased risk exposure, may choose to withdraw from early-stage projects. This would restrict capital availability for new developments, reducing housing supply, increasing prices, and ultimately hurting the end consumer through fewer and costlier options.

Regulatory frameworks must aim for balance. It is necessary to implement mechanisms that safeguard the buyer, but it is equally crucial to ensure that conditions remain conducive to investment and continued development. The solution is not to restrict pre-sales, but to professionalize them, requiring transparency and accountability from those who use them as a financing tool.

Drawing from our experience, we advise developers on structuring investment strategies that establish reasonable criteria for launching and executing projects, such as the right mix of pre-sales, bank financing, and venture capital.

This strategic blend not only reinforces the financial soundness of the project, but also builds trust among all stakeholders and, ultimately, allows the developer to deliver a high-value product to the buyer. The key lies in structuring with a clear commitment to the end consumer, aligning the goals of economic development with long-term trust and value creation in the real estate sector.