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The UAE’s real estate market is one of the largest in the world and is popular for providing lucrative investment opportunities. Buyers can invest in a myriad of properties ranging from ready-to-move to off-plan properties. That said, off-plan properties have gained rapid popularity among buyers and investors alike. The influx of investing in off-plan property is mainly due to the easy payment plans and profitability after project completion.
Let’s take a closer look at the processes, steps and other aspects necessary to consider buying off-plan property in the UAE.
What is an Off-Plan Property
Any property that is purchased when under construction directly from the developer is termed as off-plan property. The property may either be yet to be built or is in the early stages of construction. That said, the buyers of off-plan property have to rely on the blueprint or the floorplan of the property provided by the developer.
Generally, the buyers have to pay a certain percentage of the total property value as a down payment. Whereas, the rest of the payment can be done in instalments, or as mutually agreed between the parties.
How to Buy Off-plan Property
Here are all the steps required to be catered by the investors before buying off-plan property in the UAE.
- Draft your Budget
The first step in buying an off-plan property in Dubai or other Emirates is to draft your budget. For convenience, divide the expenses of purchasing an off-plan property into three categories: down payment, instalments and legal charges.
The down payment is paid before signing the sales and purchase agreement. The down payment amount can be anywhere between 10% to 20% of the total purchase price. Remember that banks will not provide a mortgage for the down payment; therefore, buyers are required to save the amount by themselves.
You can read our blog on how to save money for house down payment, for some valuable saving tips.
Moving forward, the next monetary cost is in terms of instalments and legal fees. That said, if your monthly income is enough to cover the household expenses and instalments, you can opt for the off-plan project. - Consult with a Real Estate Agent
The next step in purchasing an off-plan property is to consult a real estate agent. There are several benefits of hiring a real estate agent, as they have the experience, knowledge and expertise to guide you through the process.
A real estate agent can provide you with valuable insights regarding the project and can also predict the market value of the property after completion. Moreover, their connections with the developers can aid in negotiating the final price and number of instalments. - Extract Complete Details of the Project
Purchasing an off-plan property is a long-term commitment, and before purchasing, buyers are dependent only on the floor plan. That said, it is necessary to identify and verify all the necessary details regarding the project. This should include the market reputation of the developer, previous projects and their handing over date, court cases, and land lease. A thorough verification will exempt you from future hassle, and understanding the risks of buying off-plan property in Dubai can further help buyers make an informed decision. - Choose a Payment Plan
The last step in this process is to finalise the payment plan. There are different types of payment plans offered by the developer to the investor. The payment plan varies from buyer to buyer depending upon the amount to be paid after the down payment.
Opt for the plan according to the budget you drafted. Make sure to check the interest rate, completion date and hidden costs before signing the contract. - Complete the Legalities
After sealing the deal with the developer, buyers are required to cater to the following legal steps.
Acquire Reservation Form
The first legal step after confirming the purchase of an off-plan unit is to acquire the reservation form. It is a legal document which includes the personal information of buyers, type of property, payment structure and amount of downpayment. Both the pirates are required to sign the form prior to moving towards the next step.
Sign a Sales and Purchase Agreement (SPA)
Signing a SPA is one of the most crucial steps in buying an off-plan property in the UAE. The SPA agreement includes details regarding property value, property unit layout, handing over date and payment plan.
The signed document serves as a written agreement between both parties; therefore, read the agreement carefully. Ensure there are no hidden charges or conditions that are not in your favour.
Moreover, verify the developer’s name, personal information and all the details regarding the property. Remember that it is necessary to register the agreement with government entities like TAMM in Abu Dhabi or DLD in Dubai.
Deposit Money in Escrow Account
After signing the agreement, it’s time to transfer the down payment to the developer. For this purpose, developers are required to provide you with an escrow account, in which the amount will be deposited.
To check the legitimacy of an escrow account, you can visit the official website of the government institute of your Emirate. For instance: the residents of Dubai can visit the DLD to verify the escrow account.
Once you have verified the account, transfer the amount to the escrow account. You can either use a wire transfer or pay through a credit card.
Pay Brokerage Commission
If you have hired a real estate agent, then after transferring funds brokerage commission needs to be paid. The amount of commission is variable and is generally dependent upon the overall property value.
Property Handover
Buyers are suggested to visit and inspect the finished property 7 days before the handing-over date. During the inspection, buyers can testify whether the finished property matches what was promised by the developer or not. Buyers must also check for the finishing, paint, interiors and materials used in consumption. In case of any discrepancy, buyers can ask the developer to replace the element.
Documents Required for Purchasing Off-Plan Property
Mentioned below are the set of documents required to buy off-plan property in the UAE.
- Emirates ID (Copy)
- Passport (Copy)
- Sales and Purchase Agreement (SPA)
- Reservation form
- Mortgage contract (If applicable)
Remember the above-mentioned documents are generalised, and buyers’ Emirate may or may not ask for other documents.
Things to Consider Before Investing in an Off-Plan Property
The off-plan property is quite popular due to the investment return and profit margin. However, before buyers opt for any project here are some questions to ask when buying property off-plan in the UAE.
1. Opt for a Reputable Developer
Investing in an off-plan property is a long-term commitment since the buyer has to pay the remaining amount in instalments. Therefore, prior to investing in an off-plan property check the market reputation of the developer. The first step is to invest only in registered projects constructed by licensed developers.
Buyers can visit the official website of the concerned authorities to check the developer. The citizens of Dubai can validify the developer through RERA or DLD, and for digital verification Dubai Rest App is available. Similarly, if the off-plan project is in Abu Dhabi, it must be registered with TAMM.
2. Review the Project
After choosing the project for investment, it is recommended to visit the property site physically. Visiting the property in person will help in understanding the space and layout of the property unit. Moreover, buyers can also check for the progress of the project and the quality of materials used in construction.
3. Estimate the ROI
ROI is the key aspect to consider when investing in an off-plan project. The ROI depends on multiple factors including location, property type, developer’s reputation and rental potential of the unit. Therefore, when finalising the property, it is necessary to consider these factors.
4. Prefer Location over Finance
Location is one of the most important things to consider when looking for an off-plan property. It is recommended to prefer location over the cost of the property. That said, off-plan projects at an ideal location are expensive but they generally offer higher ROI that is beneficial in the long run.
Generally, projects located near the beachfront or in newly developing areas are considered ideal. However, if you opt for a project in a developed area, make sure the public transportation like metro or bus stations is nearby.
5. Negotiate on Payment Plan
To facilitate investors, developers offer a wide range of payment plans. Each plan comes with its pros and cons that should be considered before you opt for one. Negotiate the terms and conditions and instalments of the payment plan as per buyers’ convenience and budget. Remember that inability to pay instalments on time can make you a defaulter and in some cases, investors also have to pay a penalty for late payments.
For further details, read our blog on the pros and cons of different off-plan payment plans in the UAE.
6. Read the Contract Carefully
Once you are done with all the above-mentioned aspects, it’s time to sign the SPA with the developer. Prior to signing the agreement, make sure to thoroughly read it. Look for any subtle terms and conditions that you have not agreed on. Moreover, look for an asterisk symbol (∗) to identify hidden conditions mentioned in the contract.
This was the complete list of things to consider before buying an off-plan property in the UAE.
How to Deal with Delayed Property Handover
Delayed handover of off-plan property is a common issue that investors can face. The delay can be due to multiple reasons including market conditions, international crises, construction problems and others.
Regardless of the issue, the developers are obligated to hand over the property on the promised date. Let’s read and discover how to deal with delayed off-plan property handovers in the UAE.
1. Negotiate with the Developer
In case you are facing a continued delay in the property handover, the first step is to negotiate with the developer. Negotiate with the developer and agree on a solution that is beneficial to both parties.
Alongside, read the SPA as it should have a clause elaborating the solution of delayed property handover. If the developer is unable to cater to the mentioned clause, buyers can file a refund claim.
2. Check if the Project is Cancelled by Government
Before filing a claim check whether the property is cancelled by the government or not. The concerned authorities in every Emirate have the right to cancel off-plan projects for multiple reasons. The authorities also mention details regarding the refund process, in case the project is cancelled by the government. The secured transaction and ability to retrieve paid amounts is another reason to invest in off-plan properties in Dubai and other Emirates.
3. File a Claim
If the property is not cancelled by the government, buyers can file a refund claim. However, make sure the grace period for the delayed property handover provided to the dealer is over. Filing a case before the grace period will be of no avail. It is recommended to seek professional assistance for filing a refund claim to avoid any hassle.
FAQS
To buy an off-plan property in the UAE, buyers first have to draft their budget and select an area to buy an off-plan project. Once buyers have selected an area, hire a real estate agent, find a project by a reputable builder, choose the payment plan and complete the legalities.
No, off-plan properties are generally priced lower than the ready projects. That said, buyers can save a significant amount when choosing off-plan property over ready projects.
If you do not pay instalments on time, the developer may charge penalties. However, if payment is delayed for a certain period, the contract is null and void, giving developers the right to sell the property to another buyer. The defaulter will receive the paid amount from the developer after a certain period mentioned in the agreement.
Yes, you can sell your off-plan property before it is completed. However, read your contract, as some developers do not allow you to resell the property until an agreed amount is paid.
Here we conclude our guide to buying an off-plan property in the UAE. The off-plan properties are considered an ideal investment if you are limited on a budget or have limited cash to pay for down payments. Alongside convenient payment plans, the off-plan projects offer multiple other benefits including higher ROI. If you are interested in availing of these benefits, browse through these properties for sale in the UAE and find an ideal off-plan project for investment.
Besides, if you have other queries read our blog on off-plan property in Dubai FAQs.
Stay tuned to dubizzle’s property blog for more information on buying property off-plan in Dubai.
