Now that you have begun your journey to explore buying a property in Dubai, you will have certainly come across off-plan properties. Often accompanied by beautiful CGI’s and renders which may have caught your eyes. Off plan properties in Dubai offer attractive payment plans and pricing. In this blog, we will discuss the benefits and potential risks involved in buying off plan property in Dubai. We will also explain why investing in off-plan properties can be a great opportunity in the Dubai real estate market. As well as the process of purchasing an offplan property in Dubai.
Why Buy an Offplan Property at Launch?
The definition of the word offplan is to buy a property before it is built based upon the plans. To buy an offplan property at the launch means to be amongst the first people to purchase as soon as a property is released to the market by the developer, or within the initial 24 hours. Buying an offplan property at the launch is very popular amongst buyers and investors. This is because, it is a unique opportunity to purchase at the developers original prices and to be able to handpick your unit. In popular projects it is also one of the only chances to purchase. Due to strong demand some projects sell out within a day or less.
How to secure a unit and buy an Off Plan property at launch?
Sometimes the strong demand for certain projects makes it challenging to secure a unit within the launch. Sometimes buyers outnumber the units available. However, by working with a well-connected agent from a reputable real estate company, you maximise your chances to secure the right property.
Who can buy an Off Plan property in Dubai
Currently, the UAE is home to 8.84 million expatriates. All nationalities are welcome in Dubai, and there are plenty of opportunities for those who want to purchase a property. Despite having or not having a UAE residency, all foreigners are able to purchase a property in Dubai. The properties which are available for sale to foreigners must be situated in the Dubai Freehold Communities. This makes Dubai an attractive destination for those who are looking for a place to invest their money. With so many different nationalities represented, Dubai is a cosmopolitan city that has something to offer everyone.
The Benefits of Buying an Off Plan Property in Dubai
Original Prices & Flexible Payment Plans
Offplan properties in Dubai offer investors cash flow flexibility as they are sold with payment plans which are linked to the construction of the property. With a wide range of impressive offers available, our consultants can help you to navigate the plethora of options including post-handover payment plans. These give investors and end users a unique opportunity to purchase a property that can be paid for after receiving the keys.
Off-plan properties are often sold at reduced prices to ready properties making them a more attractive investment option.
Capital Appreciation and Profits | Flip the Property
The value of offplan properties tends to rise significantly close to the handover. Therefore investors often sell prior to handover for a significant profit.
Offplan properties give buyers the chance to take advantage of the capital appreciation as the value of their property goes up during the construction phase. And with Dubai’s strong economy and growing population, there is every reason to believe that prices will continue to rise in the future. So if you’re looking for an investment that will give you both cash flow flexibility and the potential for capital gains, off-plan properties in Dubai are for you.
The other important factor to consider in this case is; the profit on the resale (flip) is made as a percentage of the total original price however the investor will have only paid a certain fraction of this at time of sale. Therefore the profits tend to be very high with investors achieving substantial returns relative to their initial investment.
Variety of Properties in Dubai
There is an abundance of exciting off-plan developments across Dubai which offers you an extensive selection in terms of developers, locations, prices and payment plans. Our expert consultants at Audley’s International will assist you to navigate these and make a selection which is best for you.
Laws and Regulations
The Dubai Land Department legally enforces that a developer must own 100 percent of the land of their project. Furthermore, the developer must deposit 20 percent into an escrow account, or complete 20 percent of construction before selling off plan.
In addition, in order to enhance transparency and ensure the security of buyers, the Dubai Land Department provides an official project tracking service. This invaluable resource allows buyers to stay informed about the progress of real estate developments. Given that payment plans are tied to the milestones of a project, it is crucial for buyers to have the ability to monitor the advancement of their properties. This ensures that buyers are not obligated to make instalment payments unless the specified construction milestones have been achieved. By offering this service, the Dubai Land Department empowers buyers with the necessary information to make informed decisions and safeguards their interests throughout the purchasing process.
The Risks of Buying Offplan property in Dubai
Delays in Completion & Handover
One of the primary concerns associated with purchasing an off-plan property is the potential for project delays. It has been observed that a significant number of projects launched in the UAE since 2008 have experienced handover delays of at least one year beyond the initially quoted timeline.
Nevertheless, in contrast to those days, current off-plan payment plans are structured in accordance with construction milestones. This helps mitigate the risk of delayed handovers, providing a measure of assurance to buyers. However, it remains essential to consider this factor, particularly if you are renting and have specific plans to move into your new property by a certain date.
By factoring in the possibility of project delays, you can make informed decisions and ensure that your expectations align with the potential timeline of your off-plan property. It is advisable to closely monitor the progress of the construction and stay in communication with the developer to stay informed about any updates or changes that may affect the expected completion and handover date.
Variances In The End Product
Reputable developers understand the importance of their brand and the direct correlation between the quality of their finished projects and their future success. They recognise that their reputation is built upon consistently delivering properties that meet and exceed standards. As a result, they prioritise meticulous attention to detail and ensure that every aspect of their developments is executed with excellence.
Nevertheless, it is important to acknowledge that not all developers adhere to these high standards. To mitigate any potential risks, it is advisable to purchase from established and reputable developers who have a proven track record of consistently delivering high-quality developments.
By choosing to work with reputable developers, you can have greater confidence in the integrity of their projects and their commitment to delivering properties that meet your expectations.
Change In Financial Circumstances
When purchasing a property off-plan, it is important to understand the payment structure involved. Typically, buyers are required to make payments ranging from 20% to 90% of the total purchase price during the construction phase, with the remaining amount due upon completion of the property.
While this payment arrangement allows for flexibility and provides an opportunity to secure a property at an earlier stage, it is crucial to consider the potential impact of changing financial circumstances. External factors such as job loss could potentially affect your ability to obtain a mortgage in the future.
It is wise to assess your financial stability and evaluate the potential risks associated with committing to an off-plan property purchase. Consider the stability of your income, potential changes, and your overall financial outlook. Maintaining a contingency plan and ensuring that you have sufficient funds or alternative financing options in case of unforeseen circumstances can provide peace of mind and mitigate potential challenges.
Payment Obligations to Resell your property
When purchasing an off-plan property, it is essential to be aware of potential restrictions that may apply when it comes to reselling the unit. In many cases, developers require buyers to pay a set percentage of the off-plan unit’s price (usually 30%) to the developer before they can sell the property.
By familiarising yourself with these restrictions and planning accordingly, you can approach the sale of your off-plan property with clarity and ensure a smooth transaction.
Investing in an off-plan property comes with a drawback that should be considered: the waiting period until the project is completed and ready for rental. Unlike purchasing a ready property where you can immediately start earning rental income, off-plan properties require patience until the construction and handover processes are finalised.
The Process to Buy An Off Plan Property
1. BUDGET ACCORDINGLY for your off plan property
There are currently many impressive offers in the market with developers offering staggered payment plans which are linked to the progress of construction. Some developers even offer post-handover payment plans, which allow investors a fantastic and unique opportunity to purchase a property that they can continue payments after receiving the keys.
Consider your budget and long-term goals when making your decision, as well as any risks associated with the investment. With careful planning, you can take advantage of these unique opportunities and purchase the property of your dreams.
2. DECIDING THE TYPE OF off plan PROPERTY YOU WANT AND WHERE
Purchasing a property is a huge investment, both financially and emotionally. It’s important to take the time to understand what you want and need from your home before beginning the search. For some people, budget is the defining factor. Others may prioritize location, preferring to be near the water or in the heart of the city. Some buyers are looking for a luxurious vacation home while others want a simple and affordable place to live. Another decision to make is whether you want to purchase a villa or an apartment. No matter what your budget or lifestyle, there is a perfect property waiting for you in Dubai. With so many options available, it’s important to take your time and find the one that best suits your needs. With a little patience and research, you’re sure to find your dream home in this vibrant and exciting city.
Determining if you want an off-plan property that you can pay towards slowly or a ready property is also an essential first step. It is important to do research and be familiar with the developer and community you are purchasing into. A good indicator of what to expect is to look at the developer’s track record as well as past projects. Our expert team is here to provide you guidance throughout this entire process and familiarise you with developers, developments and master developments.
3. UNIT SELECTION in off plan property
Once you narrow down on the development you desire the next step is to select the right unit for you. It is important to consider aspects like the size and layout as well as the floor and view. For some people, the orientation and positioning of the unit are extremely important factors too. It is essential at this stage to be aware of what is included with the property such as white goods and furniture.
4. PURCHASE an off plan property
The transaction is very straightforward once you have selected your dream property. You are required to sign off on the floor plan, the payment plan and the developer’s offer to purchase letter. At this stage the down payment must be paid, this can be paid via credit card, online bank transfer or cheque to the developer. There is a 4% plus 3,000 Dirham Oqood registration fee payable to the Dubai Land Department, which must also be paid (unless waived as part of a deal). The developer will require a copy of your passport, visa page and Emirates ID if you are a UAE resident. The developer will then follow up with your contracts and you will be obligated to continue the payment plan as the new owner.
Get in touch with us today to learn more about what we can do to help you purchase your dream property in Dubai.