Off-Plan Property in Dubai – Everything you need to know
What is an off-plan property
An off-plan property is an unconstructed property purchased directly from a developer or in some cases a first owner. In the case where the buyer is buying directly from the developer at time of purchase the buyer usually pays a 10-20% down payment and signs SPA (Sales Purchase Agreement). Depending on which developer the rest of payments made can and do vary but are usually linked to construction.
Advantages of buying off-plan property
- Save Money – Buying an Off plan property allows investors to get a purchase price at the earliest and lowest possible price. It also allows buyers to choose the very best apartments in a particular development. This plays a big part in increasing the chances of gaining the maximum return on their investment.
- Sell Before Completion – Quite often investors can sell off their off-plan property contracts prior to a projects completion. Assuming the market has performed well and project proved popular owners can often sell at a considerable profit.
- Lower up Front Costs – Payment plans for off plan property can and do vary from developer to developer. With some developers only requiring a 10% down payment and the rest linked to constructions the outlay required is relatively low.
Potential Risks in buying off-plan property
- Delayed Completion Time – Developments don’t always go to plan and there have been cases of projects being completed after their scheduled completion dates. It is for this reason very important to do your research on the project developer. Look into their track record and ensure any sale agreement signed ensures you are compensated for any such delays.
- Change in Market Conditions – A downward move in property prices can result in the property being worth less than what the buyer has paid. This risk is not limited to off plan properties but can affect them more as they may be harder to liquidate than ready properties.
What guarantee do I have that my development will be completed?
To help ensure an off-plan project is completed, RERA has introduced numerous measures which must be met by the developer. One of these stipulates that the developer must own 100 per cent of the land belonging to the project. Along with this the developer must either make a down payment of 20 per cent as bank guarantee, deposit 20 per cent in escrow account, or complete 20 per cent construction before selling off plan. Together with the above measures, RERA requests contractors to submit a 10 per cent performance guarantee.
Along with these measures, it’s imperative buyers do their own research and look into developers they are considering buying from. We recommend looking the developer’s track record as well as reputation.
When can I sell my off-plan property?
Numerous measures have been put in place in order to ensure the Dubai market is a stable and secure market to invest in. One of these measures has a direct impact on buyers who look to sell their off plan property before completion. Dubai’s largest developer Emaar Properties now requires owners to have 40% of their off plan property paid off before it can be sold to a new owner. This figure of 40% does vary from developer to developer so it’s important to check with each developer.
Once the minim repayment threshold has been met the process of selling an off-plan property is very similar to selling a ready property. Buyers and seller agree to price and terms, sign contracts and apply for NOC where the new buyer is registered with the developer and ultimately takes over all the outstanding payments once transfer is complete. It is also worth nothing that contrary to popular belief the new buyer is responsible for the 4% DLD Transfer Fee regardless of the fact this has already been paid by the first buyer.
See our comprehensive Buying Guide for all you need to know when considering an off plan project.