What you need to know before buying an off-plan property in Dubai

The term off-plan property refers to a property that is offered for sale or purchase before construction has been completed. In Germany, this is also referred to as New construction projects. This means that you buy a property on the basis of its construction plan.

Off-plan properties are popular with foreign and domestic investors alike as they are easy to afford and offer a high return on investment (ROI). However, there are numerous aspects that determine the future and associated success of these off-plan properties.

We have listed all the important aspects you need to know before buying an off-plan property in Dubai.

You should bear this in mind

Off-plan property is a lucrative investment opportunity and there are numerous reasons to invest in off-plan property. to invest in Dubai. However, before you do anything, you should find out about the following aspects of buying an off-plan property in Dubai.

The change in market dynamics

Changing market dynamics are an important aspect to consider before buying an off-plan property. Changes in the market lead to fluctuating property prices. This can be either positive or negative for buyers, depending on how the market develops.

If the market moves downwards, the value of the property falls and investors cannot realise the expected return. If, on the other hand, the market moves upwards, the value of the property increases, resulting in a higher return.

It is therefore better to invest in a market that has the potential to rise in the near future. In addition, projects in prime locations are better because they are less affected by market dynamics.

Delayed completion of the construction project

Delayed handover and completion are common problems associated with off-plan property. This delay can be caused by the global situation, pandemics and financial crises in the industry. To overcome this problem, RERA Dubai has developed rules and regulations for delayed handover of off-plan properties.

The purchase contract signed by the building authority and the buyer contains a clause on this subject. This clause should clearly set out the conditions and options in the event that the property developer fails to deliver the project on time. In view of this clause, you can either take legal action, opt for a settlement or claim money back.

Resale of a property

Another method for German investors is to sell on an off-plan property at a profit before completion, as the property often increases in value with each further stage of construction. The whole thing is now subject to a few conditions. As a rule, property developers prohibit buyers from selling their property before they have paid a certain amount of the total value (often 30%).

This amount is set by the property developer and buyers are legally obliged to adhere to it. However, once the buyer has paid the required amount, they are free to sell their off-plan property.

Expectations of the property after completion

It is not necessary that every project will fulfil the buyer's expectations upon completion. The project shown in the brochure may differ from the finished product. This depends entirely on the builder of the project.

Reputable construction companies associate the finished project directly with their reputation in the market and their projects correspond to the details mentioned in the brochure. One way to avoid this situation is to invest in projects from reputable construction companies.

At Home Dubai, we only work with property developers who fulfil the expectations of German investors.

Immediate return on investment

Off-plan properties are long-term investments and buyers have to wait for the ROI until the project is completed. In contrast, the return on finished properties starts as soon as the property is let.

Although it is a long-term investment, off-plan property is favoured because of the initial discount and the financial benefit you can gain from rising markets.

Change in the financial situation of the seller

The off-plan property will be purchased based on the construction plan only and buyers will be required to pay 20% to 80% of the total amount in instalments while the project is under construction. The balance is due after the project is handed over. If you pay in cash, the chances of the above risks are less. However, if you are dependent on the mortgage, the risk to your financial situation also increases.

The Dubai mortgage only covers 50% of the total value of the off-plan property. Moreover, this 50% will be provided by the bank if the buyer has already paid the remaining 50% of the total amount. Therefore, before buying an off-plan property, make sure that you have sufficient funds to pay the 50% of the total amount.

Tips for buying an off-plan property

To minimise the risks of buying property in Dubai, buyers need to invest carefully in the project. Here we have put together a checklist for buying off-plan property in Dubai to help you mitigate the risks.

Check and verify the project

Before you Invest in a new building projectyou should check the legitimacy of the project. As per RERA laws, only legitimate and authentic projects can be advertised. Take a look at the developer's history or current projects under construction. Reviews and testimonials can show what experience investors have with the property developers.

Understand the price structure

A number of buyers, especially first time buyers, only enquire about the payment plans in Dubai and finalise the contract based on this plan. However, there are numerous other aspects and hidden costs that may or may not be included in the project.

Always ask for the price per square metre of the project to estimate the total amount you will have to pay. Also make sure that you can pay at least 50 % of the total amount in cash, as the mortgage will only be granted after payment of 50 % of the amount.

Also, opt for a 50/50 payment plan where you have to pay 50% of the amount during the construction phase and the remaining 50% after the completion of the project. This way, you can secure 50% of the amount in case of an uncertain event.

Take the location into account

Prioritise the location of the property over the price. This is because projects in prime locations are less susceptible to market uncertainties. In addition, the ROI increases after completion of the project.

Read the contract

Similar to the RERA lease, the property developer and buyer are required by law to sign a contract. This contract contains various clauses that relate to numerous issues related to the off-plan property. Read the contract thoroughly and negotiate with the property developer on any clause that you are not comfortable with.

Get professional help

If you are a beginner in the property industry, you should get professional help. Property agents in Dubai or we at Home Dubai can provide you with this help. We have professional experience and can give you accurate advice on the various aspects of property.

This was all the necessary information you need to know before buying an off-plan property in Dubai. Despite some risks, off-plan properties are a lucrative property investment opportunity. However, the return on investment is long term and you will have to wait until the project is completed. If you want an immediate return, finished properties are more lucrative. You can take a look at these properties for sale in the UAE and buy finished property. Apartments or Villas buy. If you are unsure whether you want to invest in a finished property or an off-plan property, we have an article on New-build project vs. finished property in which all the advantages and disadvantages of both options are compared.