Off-Plan Property in Dubai — Everything You Need to Know
You might be a new investor in Dubai’s booming real estate market and have heard the term “off-plan property” for the very first time. You want to know what it means, whether you should invest in it, and its perks and disadvantages.
At Grand Reliable , we consider it our primary job to educate our readers about anything that can benefit them. This piece involves A to Z of Off-plan properties and their role in Dubai’s real estate market. So, fasten your seatbelt as we will take a ride inside the world of off-plan properties.
What is An Off-Plan Property?
Off-plan property refers to a property that is still under construction, bought directly from a developer. In some cases, the construction hasn’t started yet and sometimes a property is in its initial stage of construction.
Customers look at marketing material such as brochures to choose to invest in one of such properties. They contain information about the development and the exact unit they are purchasing.
Purchase is generally made with a 10 to 20% down payment , and both parties sign the SPA (Sales Purchase Agreement).
Why do People Buy Off-Plan Properties?
Off-plan properties allow investors to buy a unit still in the construction phase, usually at a discounted price than the market worth of finished units.People often buy these properties depending on artist impressions, architectural plans, and other project details given by the developer.,
Benefits of Purchasing Off-Plan Property in Dubai
Sell Before Completion
In a thriving market like UAE, sometimes you can sell your property even before it gets completed. Seeing its market performance and the project’s popularity, you could sell at a substantial return.
Purchasing an off-plan property in Dubai, UAE helps investors get properties at the earliest and lowest price possible. Investing in a property before it is completed means you get to pick the optimal units in a project. It means you can choose the apartments that have the potential of bearing the maximum profits on investment.
You Get Brand New
Most of us are obsessed with brand-new things. Be it a car or a house, we like it new that no one has ever touched. Off-plan property is something that nobody has ever used.
Trendy Design and Cutting-Edge Amenities
Off-plan properties in Dubai typically have contemporary architecture and modern amenities. Property developers want to attract customers by equipping their projects with the newest technologies and trends, providing improved living spaces and premium facilities.
Off-plan properties tend to have lower prices than the finished units in the same location. Property development companies offer flexible installment plans and attractive prices to incentivize early buyers.
It gives a chance to buy an apartment at a more competitive price, allowing for possible capital appreciation as the construction is finished.
Upfront Costs are No More A Worry
Different developers ask for different down payments and the total price. However, many impose only a 5% upfront payment and the remaining associated with the constructions, which makes the required outlay comparatively low.
Capital Appreciation Made Easy
UAE’s real estate market is constantly maturing and growing, which increases the potential of capital increase on off-plan properties. When a property development project starts, its value is lower than the surrounding completed properties.
As the contractors start placing roofs and walls, the unit’s worth starts to go up. So, sealing your deal in a yet-to-be-built apartment or another type of unit allows you to enjoy its capital appreciation as the market develops and construction moves on.
Choose the Apartment You Like
Yes. It is another perk of investing in off-plan units that you have a variety of options to choose from, such as several sizes, layouts, and views. You are more likely to get to pick high-quality units and get properties with better traits or locations within the project.
The government of the United Arab Emirates requires property development agencies to show specific guarantees for off-plan units. These can involve completion timelines, post-completion maintenance support, and quality standards. Such guarantees can provide relaxation to the customers about the development completion and assure them of a high standard of construction quality.
Potential for Customization
You can tailor specific project components, like fixtures, finishes, and layouts when investing in an off-plan property Dubai, UAE. Some property development companies give you the chance to change the property's specifications according to your taste and preferred lifestyle.
Off-plan properties tend to come with flexible installment plans, like episode-based structures that encompass the construction duration. It can benefit investors because it allows them to split the total sales price over the period, making it easier than the upfront payment requirements for finished units.
Downsides of Buying an Off-Plan Property in UAE
Delay in Completion of Property
Things always don't go as planned and the same is true for property development projects. When you go to see a construction site where a property is being developed or will be developed, the developer may give you a timeline of completion.But mind you, many times their completion can go far beyond the designated time. The reason can be legal, financial, or tax issues on the developer’s end, but it only affects the investors and tenants.
The tenants will then have to wait for more before moving into their apartment, and investors will lose the profits they should have started getting if the property was completed and rented.
Do we have a solution? Conduct your research before signing the contract with a property developer. Check their track record and demand that the contract includes your compensation for any such delays.
Change in Market Conditions
Off-plan property is often just on paper which means a rapid change in its market price can make difficulties for the buyers if it is a price decrease. It means the property will become worth less money than what you paid for.
This risk is present in all types of properties and assets buying in general. However, off-plan property buyers may find it difficult to liquidate it as compared to build properties.
Not Getting What You Were Shown
It is a big pitfall in purchasing an off-plan property. Sometimes the marketing brochure shows a beautiful view, massive rooms, and spacious living rooms, but all these features are not combinedly available in the unit you purchase within a project.
Property development companies feature the most outstanding characteristics of a project in their marketing material. It’s not necessarily deceit.
We recommend you just don’t analyze the whole property development but also the apartment or shop you are buying within that project. A physical visit is a must with a guide who can tell you what they will include in your unit.
Building in the Vicinity
Buildings in the vicinity and the surroundings of your apartment or villa are also very important. It is also true for ready properties. But it is more crucial to consider this before buying an off-plan property because projects next to your property can negatively influence yours.
For instance, a skyscraper in the vicinity of your development or blocking your apartment’s view from the beach or road would not be ideal. So, you must evaluate the other developments close to the project you are considering investing in as well as know about the potential plans.
Costs of Purchasing an Off-Plan Property
Similar to purchasing a finished unit, there are specific charges linked with investing in an off-plan project. The amount of main costs, their descriptions, and who they are payable to, are mentioned below:
We want to tell you that though all these fees do need to be paid, it doesn't necessarily mean that they would always be paid by the investor. Many property development companies are paying 50% or full registration fees of DLD (Dubai Land Department) on behalf of their customers to incentivize them.
If a developer pays the entire registration fee, the buyer saves 4% of the total cost. When you combine it with the 2% saving on company fees, it becomes a convenient 6% saving.
We have discussed all the information we thought was important for any beginner going to buy an off-plan property in Dubai. If you are a first-time buyer, we recommend you take professional help from someone with experience who can guide you regarding various elements of the property.
Despite the risks, off-plan property is a profitable property investment venture. However, you need to wait patiently for the development to be completed to start raking in cash in the form of ROI. If you need a frequent return on investment, completed units are more lucrative.