September 9, 2021
Buying off-plan property in Dubai: The pros and cons.
The real estate market is offering a wide variety of investment options and attractive payment plans. The current market serves as an ideal platform for real estate investments.
Similarly, homeowners can choose between commercial, residential, ready property, or off-plan projects. However, you will need to document yourself on all aspects regarding your next property purchase, to make sure you reach an informed decision. Your investment objectives have to be aligned with your financial circumstances and long-term plans. Secondly, it is wise to plan carefully around current market knowledge and seek professional advice from qualified brokers and financial advisers.
If you choose to invest in off-plan property, you need to first have a clear understanding of what off-plan means, terms, conditions, and benefits associated with this investment. As the name indicates, off-plan properties are pre-construction properties that are not completely built and handed over. Therefore, they are not ready for occupancy. Investors who usually purchase off-plan do so with a clear intention to resell or lease out the property, once it is completed. Off-plan properties are available to purchase during the construction phase, or before completion. Furthermore, prospects are keen on such investments, especially if they want to secure a future property in a high-demand area. Similarly, capital gains resulting from the purchase are also attracting investors to off-plan. Buying with discounts and selling at the height of the market is any investors’ dream.
The “buy now & pay later” off-plan game can be a very attractive incentive. Investing in a property before completion time increases chances for long-term value growth. Also, purchasing off-plan might increase prices for other surrounding properties, which will ultimately benefit the investor. If you decide to build up your investment portfolio with off-plan property, you can count on the reliability of these assets to deliver on their value.
Normally, the buyer has to pay around 10% or 20% deposit out of the total property value. Subsequently, they need to sign a Sales Purchase Agreement.
As a real estate off-plan buyer, you will benefit from the flexibility and potential of your investment on many levels. For example, you will have first choice to select your favorite, brand-new unit, as opposed to ready property. Developers offer many perks for off-plan property buyers. For instance, the freedom to select your favored layout or a furniture package included with the property. Furthermore, you will buy below market value, as the unit is under construction. Another benefit is the attractive payment plan that the banks offer for the purchase of off-plan. Some developers waive off DLD charges or offer substantial discounts for service charges. It all adds up to help you save more, in the long run. Buying off-plan guarantees you a brand-new build that will bring good ROI upon completion.
Before you sit down to sign the sales and purchase agreement, you have to take your time and read over the contract with eyes wide open and sharp clarity around all clauses. Signing this agreement is an indication that all parties have reached a consensus and are finalizing all terms and conditions. The SPA should clearly state all the amenities and services that are included with the purchase. Furthermore, the developer cannot make any changes to same or remove any amenities from the SPA.
Be very clear on size, area, and furniture included if you do decide to go for a furniture package deal. More importantly, if you buy a villa or townhouse, make sure to understand the distance between to rows separating the properties. Also, balcony or terrace size can sometimes turn out to be smaller in reality than on the actual floor plan.
The SPA should state a clear date for completion of the property and a clear date for handover. The two should not be mixed over or allow room for any confusion. Project completion does not mean you will be handed over keys to your property. Therefore, the handover date is when the developer has to transfer everything relating to your property to you. These are two separate scenarios. Additionally, a SPA agreement should make it clear that the buyer is liable to start paying service charges only upon receiving the keys, and not a day sooner. The timeframe between the completion date and handover date should be clearly visible while you read through the SPA.
Similarly, the developer will incur penalties for delays and for not delivering the project on time. The penalty clause should also be clear to all parties and included in the agreement. Above all, the most important SPA clause should state that the developer is never at liberty to change the terms of the agreement if and when you decide to sell your property.
As with any investment, you might have to face certain disadvantages associated with purchasing off-plan. The most common inconvenience is that the project can experience delays for various reasons. This is not unusual in the construction field. Moreso, in some cases, the project will even be canceled. So where does all that leave you, as a buyer? Therefore, it is crucial to research the developer’s credentials and reliability, before deciding to buy. Do they usually deliver projects on time, how is their track record? How will they handle delays and how will they compensate you, if need be?
RERA has strong regulations to support losses for off-plan buyers. In order to protect your finances, legislation requires developers to deposit the payments from the buyers into an escrow account. Developers will only access funds in the escrow account once the project reaches near completion stage.
Ultimately, it is a waiting game for the profits. You will have to wait for the completion of the property before you even contemplate a return on investment.
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