Have you heard about off-plan properties in Dubai but aren’t sure what they are? Off-plan property, known as pre-construction, has become an increasingly popular option for real estate investors in Dubai. But before you consider buying off-plan in Dubai, it’s essential to understand exactly what it entails.
This comprehensive guide will answer all your key questions about off-plan properties:
What is Off-plan Property?
An off-plan property refers to a property that is purchased while it is still under construction. As an off-plan buyer, you are buying based on the plans and specifications provided by the developer before the project is completed. This means you purchase the property months or sometimes years before it is ready to move into.
Some key things to know about off-plan properties:
- You buy based on floor plans, artistic renderings, and a show unit – before construction is finished.
- The development will be completed as outlined in the sales contract.
- You pay for the property in installments, usually linked to construction milestones.
In short, you are buying “off the developer’s plans,” taking on some risk that it will not be completed as promised.
The Main Benefits of Buying Off-Plan in Dubai
Several major benefits make the off-plan property an attractive investment in the Dubai real estate market:
- Potentially Lower Prices: Buying early means you pay today’s prices, which are usually lower than they will be once the property is completed. As demand rises throughout construction, prices tend to go up as well. Getting in early allows you to capitalize on that growth.
- Greater Selection: When buying off-plan, you can choose from a wider selection of floor plans and units. When a development is finished, many options are no longer available.
- Flipping for Profit: Some investors sell their off-plan property and “flip” it for a profit without ever taking possession. If you time the market right, you can benefit from price appreciation even before the keys are in your hands.
- Easier Payment Plans: Developers usually allow buyers to pay in installments throughout construction. This incremental payment schedule makes off-plan property more accessible to buyers.
- No Immediate Expenses: You only begin paying once construction milestones are hit. And you don’t take possession until completion, avoiding expenses like mortgage payments or maintenance fees.
- Mortgage Advantages: A home loan is often easier for off-plan purchases since banks can see that values will rise when the property is completed. This allows buyers to finance up to 85% of the property’s future price.
- Government Backing: Off-plan developments must be escrowed in an account overseen by RERA (Real Estate Regulatory Agency). This provides protection in case the developer fails to complete the project.
- Potential Rental Income: Buyers can earn rental returns on off-plan investments relatively quickly since new builds usually command higher rents, especially before similar competing inventory enters the market.
- Early Selection of Prime Units: By reserving early, buyers can select upper-floor units with better views or corner units with extra windows and natural light – options that tend to sell out extremely quickly.
- Designer Furnishings Allowance: Many off-plan projects allow buyers to customize interiors and outfit their units with furnishings before move-in, making personalization more convenient.
The Risks of Buying Off Plan
While off-plan property can be lucrative, you need to go in with eyes wide open about the risks:
- Construction Delays: Delayed completions are perhaps the biggest risk of off-plan. While developers outline estimated finish dates, unforeseen events can push timelines out further, leaving buyers waiting longer.
- Specification Changes: Developers may substitute planned amenities, finishes, or features with alternatives, resulting in a final product different than initially promised.
- Developer Defaults: A worst-case scenario that is rare but possible – the developer goes bankrupt or abandons the project, failing to deliver the finished property.
- Flipping Difficulties: Between delays and slower market growth than expected, some buyers find it harder to flip off plan property for the quick profit they hoped for.
Protecting Yourself as a Buyer
If you decide to purchase off-plan in Dubai, make sure to take precautions:
- Do in-depth research on the reputation of the developer
- Carefully study the contract terms before signing
- Utilize escrow accounts for your payments
- Work with a reputable real estate agent who can offer guidance
As long as you know the risks and safeguard yourself accordingly, buying off plan can be a smart path into Dubai’s red-hot property market.
Steps for Buying Off-Plan Property in Dubai
If you decide to buy off-plan property, what’s the process? Here is an overview of the key steps:
- Find a development and unit. The fun part is searching listings and showing units to choose your ideal off-plan property. Come armed with developers, locations, and market trends knowledge to support your decision-making.
- Reserve the unit & sign the contract. Once you’ve selected the development and unit you want, reserve it by signing a reservation form and an initial sales contract. This commits you to buying and secures the price.
- Set up a payment plan & escrow account. Work with your real estate advisor to structure your payment plan in line with construction milestones. Open a developer escrow account through an approved bank or trust company to protect your payments. Make payments over construction.
- As benchmarks are reached, your escrow funds will be released to the developer to fund the next phases. Track progress carefully and conduct site visits if possible.
- As the property reaches the completion stages, do a thorough walkthrough inspection to catch any deficiencies for the snagging list. Common issues include cosmetic defects, malfunctioning appliances, or missing finishes.
- Finally, verify all snags were properly addressed, then sign off to transfer the title and officially close on your dream property!
Ready to Buy Off-Plan in Dubai?
Before construction is complete, purchasing property “off-plan” in Dubai can be a smart move for investors. However, the process differs from buying existing real estate. Going in informed is key.
Working with an experienced real estate agent is highly recommended. They can expertly guide you through the off-plan process, explain the nuances, and look out for your best interests. An agent well-versed in off-plan can prove invaluable.
At Autograph Realtors, our agents specialize in off-plan purchases. We take investors through every step – explaining fees, payments, handover details, and more. If you’re considering buying off-plan in Dubai, consult our experts. We’re here to help make it a smooth, rewarding investment.