Things to consider when buying off-plan property in Dubai
Off-plan properties, also called ‘off the plan’, are a popular choice for investors thanks to the attractive payment plans and discounted prices. Looking to buy off-plan property in Dubai? With the proper research and steps taken to avoid mistakes, buying such a property can be rewarding financially in the long run. MyBayut provides a handy guide for things to keep in mind when analysing off-plan property buying risks.
WHAT ARE THE RISKS OF PURCHASING AN OFF-PLAN PROPERTY IN DUBAI?
Off-plan properties in Dubai come with attractive prices and choices. There are risks to consider when considering investing in the off-plan property market in Dubai. So, we have compiled a list of questions to ask when buying off-plan property in Dubai.
DELAYED COMPLETION OR CANCELLATION OF THE PROJECT
One of the biggest off-plan property buying risks is delayed handover and completion. Unfortunately, developments don’t always follow the schedule and delays in construction can happen.
Therefore, before you buy off-plan property in Dubai, ensure that the sale and purchase agreements clearly mentions the completion date. It should also mention how the developers will handle the situation if they can’t meet the handover date.
There may be situations when the project can get cancelled or terminated before completion — resulting in buyers losing the money they’ve paid so far. It’s, therefore, crucial to research the developer before buying and ensuring they are established and reliable.
The Real Estate Regulatory Agency (RERA) has legislation to protect off-plan property buyers — by requiring developers to place all payments paid to them in a registered escrow account. They will only be able to access it when the project has reached a particular completion stage.
When it comes to off-plan property buying risks, ensure the developer, real estate project and escrow account are registered with DLD and RERA.
MARKET CONDITIONS MAY CHANGE
Another one of the off-plan property buying risks in Dubai is the fluctuation of market conditions. The price can go downhill,, so it can be lower than what you initially paid after purchase.
If you buy when the market trends are positive, you can benefit in the long run. This way, you can take advantage of competitive prices and enjoy greater returns after completion.
Also, ensure that the project has a good location, is well-connected to other parts of the city and has good surrounding infrastructure.
QUALITY MAY NOT BE WHAT YOU EXPECTED
It’s also important to look at the developer’s past projects when it comes to the quality of the property. While the brochures may look very appealing, the finished product might not be of the same standards or to your liking.
This is where off-plan properties differ from ready properties, where you can see the unit you intend to buy. This can be mitigated by researching the developer and analysing their track record.
CANNOT BE SOLD UNTIL A CERTAIN PERCENTAGE OF THE SALE PRICE IS PAID OFF
Off-plan property buyers may find themselves restricted if they want to sell their unit before completion. Developers often require buyers to pay off a certain percentage of their off-plan property in Dubai before they can sell.
So an important buying tip is to check with the developer regarding the minimum threshold after which you can sell your off-plan unit.
NO IMMEDIATE RETURNS
One of the disadvantages of buying off-plan is that investors will not see immediate returns until the property is completed. Those purchasing ready properties, however, can start to benefit from rental returns. However, those buying off-plan property in Dubai can enjoy discounted prices and capitalise on rising rates once the project is completed.
WHY BUY OFF-PLAN PROPERTY IN DUBAI?
Off-plan property purchases have gained popularity with first-time buyers and experienced investors in Dubai for several reasons. Some of the benefits of buying off-plan property include discounted prices instead of purchasing ready properties.
Meanwhile, the market value for the off-plan property could increase while the buyer would still only pay the ‘locked-in’ price. This way, they can attain excellent returns when they decide to sell.
There are also many options for off-plan projects in Dubai by master developers, such as Emaar and Dubai Properties. So investors have a variety to suit their budgets and taste.
Read our list of reasons why to invest in off-plan properties in Dubai to get further clarity.
FREQUENTLY ASKED QUESTIONS
CAN I GET A MORTGAGE TO BUY OFF-PLAN PROPERTIES?
Yes, however, mortgages for off-plan properties in Dubai have a maximum loan-to-value ratio of 50%. Banks also have conditions on the type of properties and projects they are willing to finance. This is also something to keep in mind when buying off-plan real estate in Dubai.
There are also attractive post-handover payment plans for off-plan properties in Dubai, significantly reducing the burden on investors.
HOW DO I SELL OFF-PLAN PROPERTY?
You must check with the developer regarding conditions for off-plan property sales. Developers often require buyers to have paid off a certain percentage of the property before they can sell. This percentage can vary between developers, so do your research before buying off-plan property in Dubai. You can learn more about selling your off-plan property in Dubai in our complete guide.
That concludes MyBayut’s guide to off-plan property buying risks in Dubai. We hope it helps you compare the risks and benefits of buying off plan property in the city.
