Your complete guide to off-plan properties
The National reports that with 25,456 transactions registered in Q3 2022, off-plan purchases reached a 12-year high in terms of both value and volume.
In Dubai, the effects of the world economy may seem no more than a gentle breeze, but many investors seeking to safeguard and increase their cash in the United Arab Emirates are turning to real estate, particularly off-plan property.
What is off-plan property?
Off-plan property refers to purchasing real estate before it has been constructed. Real estate purchased off-plan often costs between 10% and 30% less than real estate purchased after it has been built.
Why is it cheaper?
Off-plan real estate is less expensive than pre-built real estate because you are investing in a plan. Based on the blueprint and nearby current development, there may be like-for-like pricing comparisons; however, this value is not certain until the project is finished. As a project nears completion, the price of off-plan property rises as the investment risk is reduced and more buyers who need to move fast enter the market.
What happens if the development fails?
Your money is never 100% safe, just like with any investment. Even with pre-built real estate, your property’s value could fall below the amount you paid for it, and you might also lose part of the money you put into it.
To prevent investors from losing their money, the Dubai Government has implemented a number of regulations, including the Escrow Law, following the global market meltdown of 2008. According to the Escrow Law, the developer is required to deposit all client funds received for the purchase of an off-plan property into a separate Escrow Account.
These funds can only be released to the developer once the project has reached specific construction milestones. Because of this, it is to the developer’s best advantage to start and finish the project on schedule.
How to purchase an off-plan property?
You have two options when buying off-the-plan real estate: you can deal directly with the developer or use a licenced realtor like Victorstone. Agents are a fantastic choice for people looking for assistance discovering the ideal house and are open to working with many different developers. Agents are paid by the developer, not the customer, and have access to and oversight over the entire market.
The most common methods of payment, cash or payment plans, are available once you have selected the ideal off-plan development for you.
Buyers can stretch out the cost over a number of months with payment options. These usually take the form of 50/50 agreements (where 50% is paid up front and 50% at completion), 60/40, or 40/60. Some even offer plans that allow you to pay between 1% and 4% monthly over 5 years after making your deposit, which is normally between 10% and 20%. There are numerous payment plan variations; they all vary by developer or development.
Is it easy to sell an off-plan property before its completion?
In Dubai, the secondary off-plan market is flourishing. Some people purchase off-plan real estate with the intention of selling it as soon as it is finished and the price increases. Your real estate agent can help with this.
What to consider if you’re ‘Buying to rent’?
Purchasing a house with the intention of renting it out could provide investors with a return on their initial investment as the value of the finished property grows and reaches market rates, as well as an additional yearly dividend on their investment.
Considering how competitive the rental market is in Dubai right now, your real estate agent ought to have no trouble finding you a tenant. However, some developers also work closely with hotel chains and will guarantee an ROI of about 7-8% for a certain period of time while renting out the unit on your behalf.
In conclusion, buying off-plan property is a great choice for people wishing to purchase a future home, a rental property, or just to increase their investment portfolio.
If you’d like help finding the right off-plan property?