Off-plan properties have become a popular residential housing option for investors and owners alike in the UAE. Now, it has become a lot easier to be convinced to buy property off-the-plan, what with the popular use of new technology like 3D virtual reality and online reservation tools so clients can do a property walk-through and reserve a property online.
Similar to any investment, purchasing off-plan properties also comes with risks. So if you are considering buying an off-plan property in Dubai, here are crucial things you must know before making that final decision, and signing on the dotted line.
Off-plan property – what is it?
An off-plan property is a type of property that is not yet constructed and bought directly from the developer or from the first owner who bought it directly from the developer.
When buying from a developer, you may need to pay a 10-20% down payment at the time of purchase and sign a sales purchase agreement or SPA. The rest of the payments can vary depending on the developer, but this is usually linked to construction milestones. As a precautionary measure, developers are required to keep an escrow account for real estate development projects in order to protect the interests of serious investors.
Change in market conditions
If there is a downward move in property prices, it can result in the property devaluing or becoming worthless making it a bad investment. Though this risk is inherent in real estate, it affects off-plan property more because they are harder to liquidate especially when the project gets delayed or canceled.
Delayed completion time
In some cases, developments do not always get finished according to plan. Some are completed after their scheduled date of completion, or get finished but as scaled down versions of what was in the original master plan.
It is for this reason that you must be meticulous in choosing to deal with a specific property developer. Check their track record and make sure that the sale agreement you are about to sign says that you will be compensated for any delays.
When can you sell it?
There are plenty of measures put in place to make sure that the Dubai market is a secure market for you to invest in. One of them has an impact on buyers who wish to sell their property before completion.
Some developers require original or first owners to pay at least 40% of the total payments before they can sell it to a new owner. Remember that this varies from developer to developer so check with your developer should you wish to sell your off-plan property before it is completed.
When the minimum repayment threshold has been settled, the process of selling it is the same as selling a ready property. Both the seller and the buyer must agree upon the price and terms, sign the contract, and apply for a “No Objection Certificate” (NOC) where the new buyer takes over all the unpaid payments once the transfer is complete.
Six steps in buying off-plan property
Step 1: Determine the type and area of the property you want
With plenty of options out there, searching for the best off-plan property can be overwhelming. To narrow down your options, it is crucial for you to have a list of preferred areas and the type of property you want. For instance, decide if you want to buy a villa or an apartment in Dubai Marina or Umm Suqeim.
Step 2: Know who you’re buying from
Make sure that you are familiar with the developer you are buying from. Are they reputable? Do they have an excellent track record? Looking into their past projects is important because these are great indicators of what you can reasonably expect.
Step 3: Be aware of the project details
You must learn about the project you are going to purchase. Be familiar with the project you’re considering and the master plan.
Some important considerations in determining whether or not a development is right for you include the property size (number of units, area, etc.), parking arrangements, available amenities and facilities, materials to be used, proximity to other structures, and how the master development will affect your prospective property.
Triplanet real estate developers in UAE try to provide a model unit for viewing early on. But at the earlier stages, investors usually rely on digital 3D walkthroughs and mock-ups comprehensively used in the developer’s marketing material.
Step 4: Decide on what exactly you want to buy
After deciding on which development to buy into, decide on what kind of unit you want to invest in. This means paying close attention to the unit size, floor layout and height, unit position and orientation within the development, and the views from the bedrooms and living areas.
You also need to know everything that is included in the purchase such as furniture, white goods, and landscaping. By fully understanding these factors, you can calculate your initial expense and project future gains. Knowing exactly what comes with your purchase also ensures you get what you paid for.
Step 5: Carefully read the contract before signing
Before signing, you must understand what the contract is saying. Be fully aware of your obligations along with the developer’s obligations. Getting professional advice is highly recommended to leave no stone unturned.
If you are dealing with a sale and leasing real estate agent, make sure they are qualified and certified. Ask questions and probe so you get all the necessary information out in the open.
Step 6: Budget properly
Buying off-plan properties won’t require full payment upfront. Instead, you will need to allocate a budget for staggered payments depending on the construction milestones. To avoid any unpleasant surprises, make sure to know your payment plan obligations and meet them as required.
By investing in off-plan properties, you get a brand new property that is built to the latest building codes, and at a much lower price compared to ready properties.
But not all developments are created equal, so you must do your own research. Get professional advice, and follow this guide so you end up getting the best value off-plan property.
Juwaad Beg is the Chairman of Elite City Real Estate. Since 2005, the leading UAE developer has focused on developing residential real estate propositions in prime areas of Dubai. With their pricing, location, layout, amenities and after care service being second to none and priced at unbeatable rates, Elite enjoys 99% occupancy rates on all delivered projects.