Risks of 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.
RISKS OF PURCHASING AN OFF-PLAN PROPERTY IN DUBAI
Why buy off-plan property at all? Off-plan properties in Dubai come with attractive prices and choices. There are risks to consider when investing in the off-plan property market in Dubai. To help mitigate these risks, here are some key 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 sometimes face construction delays, which can disrupt the handover schedule.
Before you buy off-plan property in Dubai, ensure the sale and purchase agreement clearly specifies 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. Developers can only access these funds once the project reaches a specific 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 may decline, resulting in a value lower than the initial purchase price.
Purchasing property when market trends present a positive outlook, can yield long-term benefits. 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 brochures may appear appealing, the final product might not meet the expected standards.
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.
You can start by researching off-plan properties for sale in Dubai. Analysing Dubai sales transactions over the last 12 months can help you make a more informed decision.
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. Buyers are often required to pay a specific percentage of the off-plan property’s price, before selling.
So an important buying tip is to check with the developer regarding the minimum threshold after which you can sell your off-plan unit.
Still willing to take the plunge? Learn all the ins and outs of buying off-plan properties in Dubai. You can lower your risks by knowing all of the pros and cons of buying off-plan property in Dubai.
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 benefit from lower prices and potential value appreciation after project completion.
BENEFITS OF BUYING OFF-PLAN PROPERTY
Off-plan property purchases have gained popularity with first-time buyers and experienced investors in Dubai for several reasons. One of the key benefits of buying off-plan property is the discounted price compared to ready properties.
Additionally, the market value of an off-plan property may increase, while the buyer continues to pay the pre-agreed ‘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.
FAQs
CAN I GET A MORTGAGE TO BUY OFF-PLAN PROPERTIES?
Yes, mortgages for off-plan properties in Dubai typically have a maximum loan-to-value ratio of 50%. Banks impose conditions on the types of properties and projects they will 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. For the best price, check out the new projects in Dubai.
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.
