When browsing properties for sale in Dubai, you’re likely to encounter the off-plan purchase option. What is it, and why should you consider it?
What Is an Off-Plan Property?
An off-plan property refers to property that has yet to be constructed or, if construction has started, it would still be far from being completed. It is a direct contrast to a ready property you can occupy or move into immediately upon purchase.
Off-plan properties are bought sight unseen. Buyers of off-plan properties rely only on brochures and other marketing materials when making their purchase decisions.
Off-plan marketing materials typically include maps that indicate a property’s specific location, lot description, and architect’s perspectives. They also usually contain computer-generated renders of what the property and its immediate neighborhood are supposed to look like once the property has been constructed and the development completed.
Why Buy Off Plan?
Off-plan properties are excellent alternatives to ready properties in Dubai. Because you’re buying them sight unseen, they may come with low upfront costs and are usually sold at a lower price than ready properties.
Off-plan properties also come with attractive payment plans. Many developers offer 30:70, 50:50, or a post-handover installment plan.
The government of Dubai has also been implementing security measures to protect buyers’ rights, helping mitigate the risks of off-plan property purchases.
In light of these, off-plan properties are a good option for people who want to own property in Dubai but have a limited budget.
That said, investing in property that exists only on paper can be risky. Furthermore, like investing in ready properties, buying off-plan has its pros and cons.
Tips for Buying Off-Plan Real Estate
Before signing off on an off-plan property purchase, do your due diligence and follow these tips.
1. Consult a Real Estate Agent
You can buy off-plan properties directly from developers. Even so, you’re better off coursing your purchase through a real estate agent. There are many real estate agencies in Dubai you can approach to ask about purchasing an off-plan property.
There are many considerations when it comes to property purchases, whether you’re buying readymade or off-the-plan. A real estate agent will help you sort through such factors and provide expert guidance that will enable you to avoid potentially costly pitfalls.
2. Do Your Research
Purchasing off plan requires a strategic approach.
You might want to look at property prices and market trends to ensure the numbers make sense. Look into your finance options, growth potential, investment returns, and depreciation before signing a purchase contract.
3. Consider the Location
Location is crucial. You want to ensure the property you’re buying is accessible whether you’ll be living in Dubai or conducting your business here.
Look at public transportation options. Is it near the Dubai Metro station? Is it or will it be accessible to taxis? Is it near a major highway?
Additionally, you want to see whether it is (or will be) conveniently close to shopping malls, supermarkets, schools, pharmacies, malls, restaurants, parks, and other amenities.
4. Check the Developer’s Credentials and Work Quality
You need to buy only from a legitimate, credible property developer. Check that the property developer is registered with the government and licensed to engage in real estate development.
Find out if the developer is compliant with all the requirements of the Dubai Real Estate Regulatory Agency (RERA), including the following:
- The developer must own 100% of the land indicated in the project.
- The developer has made a 20% down payment as a bank guarantee, deposited 20% in escrow deposit, or completed 20% of the project before selling off-the-plan.
- The developer has submitted a 10% performance guarantee with RERA.
You must also check the developer’s track record, particularly the quality and standard of the company’s previous work. How well did it develop previous projects? How are its past projects faring now?
Having a real estate agent in your corner is crucial when conducting due diligence on a real estate developer.
5. Know the Risks
Off-plan properties come with risks. Since you are buying a property that doesn’t exist yet or is still under construction, you’re at the mercy of a lot of actors (e.g., developers, contractors, subcontractors, etc.) and factors.
A delayed completion and turnover date is one of the most significant risks of buying off-plan properties. If you can’t move into your house around the promised time, you may incur additional unforeseen costs (e.g., rent) as you wait to move in.
The market is also a source of risk. Through factors beyond your control, property prices may decline, in which case you’ll end up paying more money than your actual property is worth.
Finally, the off-plan house you have paid for may not look like anything that has been depicted in the marketing materials. It may not be constructed from the materials promised in the brochures or may not be as spacious as you imagined.
6. Evaluate Your Financial Situation
When buying an off-plan property, you pay a percentage of the total amount upfront. You may have to make installment payments to make the minimum required equity, and you may need to take out a loan to pay the balance upon project completion.
While buying off plan is typically less expensive than buying ready properties, it can still cost a pretty penny. Make sure you’ve made financial projections and have assessed them against your capacity to pay.
7. Assess Value
You want the best value for your money, so compare your off-plan property options to ensure you can get a property you like at the best possible price.
Additionally, compare payment plans to see which one gives you the greatest value; clue, the amount of upfront payment you make affects your total property cost.
Buy Off-Plan Property in Dubai
Dubai is a prime location for property investors. If you want to maximize the value of your expenditure, purchase an off-plan property instead of a ready asset. This lets you take advantage of lower costs and, thus, realize higher margins upon capital appreciation.
However, buying an off-plan property has risks, too, so due diligence is crucial in safeguarding your investment. This is why it’s best to make your purchase through a trustworthy real estate agent who can guide you through the process of buying property, whether off-the-plan or ready.