As a growing city and a major tourist destination, you are offered the opportunity to buy off-plan properties in Dubai at a lower price than after the launch of these projects.
The property market in Dubai is one of the most lucrative investment options for local and international buyers. The city’s real estate boom has created opportunities for investors who want to purchase properties before their commercial development begins.
In other words, if you’re looking to buy property in Dubai, then the best way is by buying off-plan properties. Off-plan properties are those that have not yet been built. Buying an off-plan property can be a great investment because if you do your homework correctly and choose a good developer, there is a high chance that the price of your unit will rise once it’s completed.
Why do people invest in off-plan properties in Dubai?
Dubai is a haven for people wishing to spend their hard-earned money in the real estate market, with a burgeoning economy, solid political infrastructure, and excellent returns on property investment.
Particularly among buyers in the area, off-plan property investments are extremely popular. Since 2002, when freehold homes were made available to foreigners, the Dubai real estate market has seen a significant increase in demand from both domestic and foreign buyers.
With over 25,000 units sold, Dubai off-plan property sales in 2017 reached a 9-year record. More launches and announcements from the real estate sector appear to be continuing the trend.
If you’re considering investing in off-plan properties in Dubai, there are several reasons why you should.
Lower prices
Off-plan properties in Dubai are usually available for much lower prices than completed properties, which can benefit investors by lowering their costs and possibly increasing their return on investment.
Obtain UAE Golden Visa
As part of the nation’s strategy to entice more investments and improve the benefits for long-term residents, those buying off-plan property now have the option to get a 10-year residency in the UAE through a Golden Visa.
Early access to up-and-coming areas
Investing in off-plan properties in Dubai gives investors the opportunity to purchase property in up-and-coming areas before prices rise.
Additionally, investing in off-plan property in these areas can provide a chance to be part of a growing community and potentially benefit from the development of new amenities and services in the area.
Capital appreciation
Property prices that are still being built have historically appreciated more quickly than those that have already been built. This is due to the strong demand and low supply of properties that are now being built. The costs will increase as more people seek to purchase real estate in Dubai.
Tax free on capital gains
Following on from the previous point, Dubai’s real estate market has a terrific price-to-value ratio. This is mainly because there are no income or capital gains taxes to pay. Foreign investors also benefit from not having to pay capital gains tax on their assets.
Attractive returns
Rental yields for unfinished properties are always higher than those for finished properties. This is so because renters are always prepared to spend more to live in a newly constructed home.
Flexible payment plans
Off-plan property developers often offer flexible payment plans that allow investors to pay for their property over time, which can make the investment more manageable.
More options for customization
Off-plan properties are often sold before they are completed, which means that investors may have the opportunity to customize their property to their specific preferences.
Rules and regulations that govern off-plan property investment in Dubai
The Dubai Land Department (DLD) is largely responsible for establishing the laws and guidelines governing off-plan real estate investment in Dubai. The DLD is in charge of policing the Dubai real estate market, including the off-plan home sales. The following are some of the main guidelines for buying off-plan property in Dubai:
Registration of off-plan projects
Before being advertised and sold to investors, all off-plan real estate developments in Dubai must be registered with the DLD.
Escrow accounts
In Dubai, developers of off-plan projects are required to put a portion of the value of the property into an escrow account, which the DLD holds until the project is finished and the investor receives the property. By doing this, the investor’s money is better protected, and the developer is guaranteed to have enough money to finish the project.
Advertising and marketing restrictions
The DLD has rigorous guidelines for the promotion and sale of off-the-plan homes in Dubai. The project and its features must be accurately and completely described by the developers in all marketing materials.
Protection of the consumer
The DLD has implemented a number of safeguards for customers who purchase off-plan real estate in Dubai. Developers, for instance, are required to offer a warranty for the property, and investors have the option to return their investment for a full refund if they decide not to use it.
In general, Dubai’s laws and guidelines governing off-plan property investment are intended to safeguard investors and maintain the integrity of the real estate market.
The process of purchasing an off-plan property in Dubai
Once you’ve identified the perfect off-plan property development, it’s time to get down to the nitty gritty of purchasing your residence. The process is straightforward and generally involves:
- Research the off-plan property market: Before making an investment, it is important to research the Dubai property market to identify potential areas for investment and to understand the current market conditions and trends.
- Choose a development: Once you have identified an area that you would like to invest in, you will need to choose a specific off-plan property development that meets your needs and budget. You should make sure that their designs suit your tastes and requirements, as well as those of any potential buyers for your property in future.
- Negotiating terms with the developer or sales agent: pricing and finance options can vary from project to project so it’s important that you compare different deals before deciding on one product in particular (for example, freehold versus leasehold). This is also where costs such as stamp duty will be revealed – so make sure these are calculated into any figures quoted by developers or sales agents during negotiations!
- Review the sales contract: Before making an offer on the property, it is important to carefully review the sales contract to understand the terms and conditions of the purchase, including the payment plan, delivery date, and any warranties or guarantees.
- Make an offer: Once you are ready to make an offer on the property, you will need to submit a written offer to the developer, along with any required documents and a deposit.
- Sign the sales contract: If your offer is accepted, you will need to sign the sales contract and pay the required deposit to secure the property.
- Make progress payments: After the contract is signed, you will need to make progress payments according to the payment plan outlined in the contract. These payments will typically be held in an escrow account until the property is completed and delivered.
- Complete the transaction: Once the property is completed and all required payments have been made, the developer will transfer ownership of the property to you, and the transaction will be complete.
Buying a property off plan through payment plans or financing options
Off-plan properties can be purchased through payment plans or financing options. Payment plans are a good option for buyers who don’t want to pay the full purchase price of their home in one lump sum. Payments are spread out over time, which is beneficial if you do not have enough cash in your bank account to purchase the property.
Off-plan properties in Dubai provide lower prices and more financial flexibility, which benefits both seasoned investors and first-time buyers. Developers compete mostly on rates and advantageous payment plans like paying 20% upfront and the remaining balances paid over the period of development and final payment upon completion.
How can you save money while investing in an off-plan property?
Off-plan properties offer numerous benefits, but they also come with their fair share of risks and challenges. If you’re considering investing in an off-plan property, here are some factors you should consider:
- What kind of property are you looking for?
- How much can you afford to invest?
- Do you know what type of payment plan is best for your needs?
- Are there any ongoing charges associated with the purchase that need to be taken into account?
These questions are important because they will help determine whether or not buying an off-plan property is right for your financial situation.
Risks and challenges of investing in off-plan properties in Dubai
Off-plan properties present a number of risks and challenges. However, with proper research and advice you can mitigate these risks. The most important thing is to be aware of the risks before investing in any property, especially one that is off-plan at this stage! This means understanding:
- The developer’s track record with their previous projects. Are they trustworthy? Have they completed them on time? Do they have any other projects currently under construction or are there any problems with those projects?
- How much money will you need to start the process of buying your property (known as the down payment)? How long does it take from signing up for your project until you receive your keys (known as “delivery”)?
Your lawyer will need to ensure that all agreements are fair and reasonable for both parties involved in case things go wrong later on down the line when closing actual sale contracts between owner/buyer & developer/seller respectively.
You should also look into what happens if either party decides not to sign anything after signing an LOI first – how much money would get lost then?
Things to consider before investing in off-plan properties in Dubai
Manage expectations
Your decision to invest in off-plan properties in Dubai are likely going to be based on brochures, a show home, and some floor plans. However, the quality of the building materials used could affect the final outcome.
Make sure to do your homework on the developer you intend to purchase from and look at some of their other completed properties to get a sense of the final result.
Be prepared for delays
This is one of the most frequent problems off-plan property buyers have, and it can be problematic for individuals who were hoping to move in but are already renting. It’s a good idea to prepare a backup plan in case of delays so you aren’t caught off guard.
However, that said, RERA, the regulatory arm of Dubai Land Department (DLD), has also introduced legislation to protect off-plan property buyers. This is by requiring developers to deposit all payments made to them in a registered escrow account, which they will only be able to access once the project has reached a certain stage of completion.
External market forces
Although the current environment suggests potential for capital gains and strong returns on investment in real estate, the converse may also be true. Between the moment you buy the property and the time you get the keys, anything might happen. For instance, during the COVID-19 pandemic, the real estate market prices were negatively affected despite bouncing back faster than the rest of the world.
When you choose to invest in off-plan properties in Dubai, be aware of current real estate market trends and take this information into consideration.
Is investing in off-plan properties in Dubai a good idea?
Off-plan property acquisitions have grown in popularity in Dubai among both novice and seasoned investors for a number of reasons. As compared to purchasing ready properties, those purchasing off-plan real estate in Dubai will benefit from lower prices.
While the buyer would only pay the “locked-in” price, the market value for the off-plan property could rise, resulting in tremendous returns should they chose to sell.
There are also a ton of options for off-plan properties in Dubai, led by leading builders like Emaar, Damac and Dubai Properties.
Investors can therefore choose from a variety of brand-new off-plan apartments in Dubai that fit their needs and preferences.
Off-plan properties can also present a lucrative opportunity for investors and homebuyers thanks to the guidelines and restrictions established by RERA to protect buyers.
