An off-plan property refers to a property that is available for sale or purchase before its construction is completed. That said, you are purchasing a property based on its floor plan.
The off-plan properties are popular among foreign and local investors alike, due to their easy payment plans and Return on Investment (ROI). However, there are multiple aspects that direct the future of these off-plan properties.
Here we have listed all the major aspects that you must know before purchasing an off-plan property in Dubai.
What to Know Before Buying Off-plan Properties in Dubai
The off-plan property is a lucrative investment opportunity and there are multiple reasons to invest in off-plan properties in Dubai. However, before making any move, comprehend the following aspects of purchasing an off-plan property in Dubai.
The Shift in Market Dynamics
The shift in the market dynamics is an important aspect to consider before purchasing an off-plan property. Shifts in the market results in fluctuating real estate prices. This can be either positive or negative for the buyers depending upon the shift.
In case, the market shifts downwards, the value of the property will decline and investors will not be able to gain the ROI as expected. Similarly, if the market shifts upwards, the property value will increase, resulting in increased ROI.
Therefore, investing in a market that has the potential to rise in the near future is a better option. Alongside, projects at prime locations are better because they are less affected by market dynamics.
Delay in Completion
Delayed handover and completion are common problems associated with off-plan properties. This delay can be caused by the global situation, pandemic and financial crises in the industry. To overcome this issue, RERA Dubai has drafted rules and regulations on the delayed handing over of off-plan property.
The sales and purchase contract signed by the building authorities and buyer includes a clause related to this issue. The clause should clearly state the conditions and possibilities if the builder fails to hand over the project on time. In light of that clause, you can either take legal action, opt for the settlement or demand for money return.
Reselling Property
Reselling an off-plan property before the project completion is a hassle for the buyers. Generally, builders restrict buyers from selling off their property before paying a certain amount out of the total value.
This amount is set by the builder, and buyers are legally obligated to adhere to it. However, once the buyer has paid the desired amount, they are free to sell their off-plan property.
Expectations from Property after Completion
It is not necessary that every project will meet the buyer’s expectations after completion. The project shown in the brochure may differ from the finished product. This is completely dependent upon the project’s builder.
Reputed builders directly associate the finished project with their market reputation and their projects comply with the details mentioned in the brochure. One possible way to avoid this situation is by investing in projects of reputed builders.
You can also seek help from the Dubai Rest app which can provide you with real-time information regarding the off-plan properties.
Immediate Return
Off-plan properties are long-term investments and the buyers will have to wait for the ROI till the project is completed. On the contrary, the ROI of the finished properties starts as soon as the property is rented.
Despite being a long-term investment, off-plan properties are favoured because of the initial discount and the financial benefit that you can gain from rising markets.
Change in Buyer’s Financial Condition
The off-plan property is purchased only on the basis of the floor plan and buyers have to pay 20% to 80% of the total amount in instalments while the project is under construction. The remaining amount is due after the project is handed over. If you are paying in cash, then the chances of the aforementioned risks are reduced. However, if you are dependent upon the mortgage, the risk to your financial condition is also added.
Mortgage in Dubai only covers 50% of the total value of the off-plan property. Moreover, this 50% amount is provided by the bank when the buyer has already paid the remaining 50% of the total amount. Therefore, before purchasing an off-plan property make sure that you have enough finances to pay the 50% of the total amount.
Tips to Purchase Off-Plan Properties in Dubai
To minimize the property risks in Dubai buyer need to invest accurately in the project. Here we have created a checklist for buying off-plan properties in Dubai to help you reduce the risks.
Scrutinise and Verify the Project
Prior to investing in any off-plan project make sure to verify the legitimacy of the project. According to the RERA laws, only legitimate and authentic projects are permitted to advertise. Browse through the Dubai Rest app and scrutinise all the details regarding the project.
Comprehend the Price Structure
A number of buyers, especially first-time buyers, inquire about the payment plans in Dubai only and seal the deal on the basis of that plan. However, there are multiple other aspects and hidden charges that may or may not be included in the project.
Always ask for the per-foot price of the project to estimate the total amount that you have to pay. Alongside, ensure that you have at least 50% of the total amount in cash to pay the price as the mortgage will be provided after you have paid 50% of the amount.
Moreover, choose a 50/50 payment plan in which you have to pay 50% of the amount during construction and the remaining 50% after project completion. This will help you in securing 50% of the amount in case of any uncertain event.
Consider the Location
Prefer the location of the property over the price. This is because projects at the prime location are less likely to be affected by market uncertainties. Moreover, the ROI will increase after the project is completed.
Read the Contract
Similar to the RERA tenancy contract, builders and buyers are legally obligated to sign a contract. This contract includes different clauses referring to multiple issues related to the off-plan property. Read the contract thoroughly and negotiate with the builder on any clause that is not favourable.
Seek Professional Assistance
If you are a beginner in the real estate industry, it is suggested to take professional assistance. Real estate agents in Dubai can provide you with this assistance. They have professional experience and can guide accurately regarding different aspects of the property.
This was all the necessary information that you must know before buying an off-plan property in Dubai. Despite some risks, off-plan property is a lucrative real estate investment opportunity. However, the ROI is long term and you will have to wait till the project is completed. If you want frequent ROI, finished properties are more lucrative. You can browse through these properties for sale in the UAE and purchase finished apartments or villas.
Stay tuned to UAE’s top property blog to know more details on the pros of buying off-plan properties in Dubai.
