Off-Plan Properties in Dubai—The Ultimate Guide

Dubai – the city boasts the highest rental yield among many other countries, prompting a surge in investments within Dubai’s real estate sector.

Nonetheless, the escalating demand has also led to soaring property prices, posing a significant obstacle for potential investors.

Hence, individuals are now actively seeking opportunities to purchase off-plan properties in Dubai, as they offer more affordability and deliver robust returns on investment.

To help you navigate this exciting market, this blog post has everything to aid you in your quest to purchase off-plan properties in Dubai!

What Is an Off-Plan Property?

An off-plan property refers to a property that has not been constructed yet or is still in its initial stages of development.

Buyers interested in such properties rely on brochures and marketing materials to gather information about the project they intend to purchase or invest in.

Additionally, the purchase process involves making a down payment of around 10-20% of the property’s total value and signing a Sales Purchase Agreement.

The remaining payments are usually linked to the progress of construction and can vary depending on the policies and procedures of the developer.

What Are the Benefits of Buying an Off-Plan Property in Dubai?

Here’s a list of some of the perks that come with buying an off-plan property in Dubai:

Save Money

When you buy an off-plan property, you have the opportunity to save money by securing the purchase at the earliest and often the lowest possible price.

Also, you have the advantage of choosing the best apartments within a specific development, increasing your chances of maximizing your ROI.

Sell Before the Completion of the Project

One significant benefit is the ability to sell the property before it is completed. Yes, if the market has performed well, owners can often sell their off-plan property at a substantial profit.

Lower Upfront Costs

Payment plans vary among developers, with some requiring only a 5% down payment and the remaining payments tied to the construction progress.

Also, this relatively low initial investment can be financially advantageous if you don’t have a lump sum amount.

Brand New

Buying an off-plan property also offers the appeal of acquiring something brand new. Thus, an off-plan property, if done right, will feature the latest designs, technologies, lifestyle amenities, etc. Such facilities enhance the overall experience of owning a new property.

What Are The Risks of Buying Off-Plan Properties in Dubai?

Like any investment, buying an off-plan property in Dubai comes with its share of risks. Hence, it is crucial to understand and consider risks of buying off-plan properties before making a decision.

Project Delays

One of the foremost risks is the potential for delayed completion. Development projects don’t always go according to plan, and there have been instances where projects were completed well past their scheduled completion dates.

Thus, such delays have adverse effects on both end users and investors. For end users, it means a delayed move-in date, which can lead to emotional and financial consequences, such as having to continue to pay rent for another property.

For investors, it translates to a loss of potential returns that could have been generated if the property had been finished and rented out.

To mitigate this risk, it’s crucial to conduct thorough research on the project developer, examine their track record, and ensure that the sale agreement provides adequate compensation for any delays.

Market Risk

Another risk to consider is the possibility of a change in market conditions. If property prices experience a downward trend, the value of the off-plan property may end up being lower than the amount paid by the buyer.

Albeit this risk applies to all types of properties, off-plan properties can be more challenging to sell as compared to ready-to-use properties, making it potentially more difficult to recover the investment.

Quality Risk

There is also the risk of not getting what you expected. It’s not uncommon for the actual property to differ from what was showcased in brochures.

It’s imperative to understand that the promotional materials highlight the best aspects of the project, and not every unit within the development will necessarily possess all those features.

Therefore, it’s critical to thoroughly evaluate both the overall project and the specific unit you intend to buy.

Other New Developments

Considering other developments in the vicinity is another important risk to account for. This risk applies to both ready-to-use properties and off-plan properties but becomes even more critical when buying off-plan.

New developments situated close to or adjacent to your property can have a negative impact on its value or desirability.

Thus, it’s imperative to thoroughly research the surroundings and gather information about any future development plans in the area.

Although these risks are genuine and can have significant negative consequences, they can be avoided by seeking expert advice.

Costs of Buying an Off-Plan Property in Dubai

The table below outlines the costs that the buyer needs to pay to Dubai Land Department:

It’s important to note that while these charges need to be paid, it’s not always the buyer who covers them.

To incentivize buyers, many developers today are offering to pay either half or the entire DLD Registration fee.

If the fee is fully paid by the developer, it results in a 4% saving. When combined with the 2% saving on agency fees, this amounts to a total saving of 6%, which is quite beneficial.

What Guarantee Do You Have Regarding the Completion of the Project?

To ensure the completion of an off-plan project, the Real Estate Regulatory Authority (RERA) has implemented several measures that developers must adhere to.

• One such requirement is that the developer must own 100% of the land associated with the project.
• Additionally, the developer has an obligation to fulfill one of the following criteria: either provide a down payment of 20% as a bank guarantee, deposit 20% of funds into an escrow account, or complete 20% of the construction before selling off-plan.
• RERA also mandates that contractors submit a 10% performance guarantee.

While these measures provide a level of assurance, buyers need to conduct their own research and due diligence when considering a purchase from specific developers.

When Can You Sell Off-Plan Property in Dubai?

In general, an off-plan property can be sold after the buyer has paid off approximately 30% of the property price.

To ensure a stable and secure market, various measures have been implemented in Dubai. One notable measure, particularly affecting those selling off-plan properties before completion, is Emaar Properties’requirement for owners to have repaid 30% of their off-plan property before selling it to another party.

However, this threshold may vary among developers, so it is important to verify with each individual developer.

Once the minimum repayment requirement is met, the process of selling an off-plan property is similar to selling a ready-to-use property.

• Buyers and sellers agree on price and terms.
• Sign contracts.
• The buyer applies for a No Objection Certificate, registering themselves with the developer and assuming responsibility for all outstanding payments upon completion of the transfer.

It is worth noting that despite the initial payment of the 4% DLD Transfer Fee by the first buyer, the new buyer is still responsible for this fee.

Types of Off-Plan Properties in Dubai

Dubai offers a variety of off-plan property types, which generally fall into three categories: apartments, villas, and townhouses. Each category has its own distinct characteristics, advantages, and potential drawbacks.

Thus, determining the best option among these choices relies on the buyer’s individual needs, preferences, and investment objectives.

Also, explore the best areas to buy off-plan properties in Dubai.

What Does It Mean To buy an Off-Plan Property at Launch?

Buying an off-plan property at launch in Dubai means purchasing a property immediately after its release or within the subsequent 24-hour period.

Dubai residents widely discuss this concept because it is typically the only opportunity for buyers to secure a property in certain projects.

Hence, due to high demand, these projects often sell out within a day or even a few hours after being launched.

How Can You Purchase an Off-Plan Property at Launch?

Purchasing a property at launch can be challenging, particularly in highly sought-after projects with few units available.

To minimize the risk of disappointment, it is crucial to take the help of an experienced agent having prior experience working with the developer.

They will understand the process and necessary documents needed and ensure everything is in order before the actual launch.

Albeit there are no guarantees, preparing significantly increases your chances of securing your desirable unit.

What Are the Service Fees for an Off-Plan Property?

Maintenance and service fees for off-plan properties serve the purpose of maintaining the common areas to meet the necessary standards. That’s because it benefits present and future residents and owners.

Also, the rate of service fees is determined by the yearly expenses associated with maintaining these spaces.

Thus, it’s important to note that the amount is set by RERA and may vary for each project.

Is it Possible to Finance an Off-Plan Property in Dubai?

In most cases, it is definitely possible to obtain a mortgage for off-plan property, especially with the major developers in Dubai.

Furthermore, different lenders have their own qualifying criteria, which are similar to those for a ready property. Thus, it’s important to note that the maximum loan for an off-plan property is typically 50% of the purchase price.

Things to Know Before Investing in Off-Plan Properties in Dubai

Investing in off-plan properties in Dubai presents a promising opportunity. However, it is essential to understand several key factors before proceeding. Here is an overview of what to consider when buying off-plan properties in Dubai.

1.      Market Dynamics

Understanding market dynamics is crucial before investing in off-plan properties. Real estate prices can fluctuate based on market conditions, which can impact your return on investment (ROI).

If the market declines, property values may drop, leading to lower-than-expected returns. On the other hand, a rising market can increase property value and increase ROI.

Therefore, focusing on markets with growth potential is advisable. Additionally, projects in prime locations tend to be more resilient to market fluctuations.

2.      Delays in Completion

One common challenge with off-plan properties is project delays. Factors like global events, pandemics, or financial crises can cause these setbacks. To address these issues, the Real Estate Regulatory Agency (RERA) in Dubai has established regulations regarding delayed handovers.

When you sign a sales contract with the developer, it should include a clause outlining what happens if the project is not completed on time. Depending on this clause, you may have options such as legal recourse, negotiation, or requesting a refund.

3.      Reselling Property

Selling an off-plan property in Dubai before completion can be complicated. Developers often impose restrictions, requiring buyers to pay a certain part of the total price before they can sell. Once this amount is settled, buyers are generally free to transfer their property.

4.      Expectations After Completion

It is important to note that the final product may not always match the initial promotional materials. This can vary based on the builder’s reputation. Well-regarded builders typically deliver projects that align with their marketing, so investing in established developers can mitigate this risk. Utilizing resources like the Dubai Rest app can also provide real-time updates on off-plan projects.

5.      Long-Term Investment Perspective

Off-plan properties are typically long-term investments, meaning that ROI will not start until after completion and renting begins. However, they can be attractive due to initial discounts and the potential benefits of appreciating markets.

6.      Financial Preparation

Before purchasing an off-plan property, ensure you have sufficient funds. Generally, you will need at least 50% of the total purchase price upfront. Buyers usually pay between 20% to 80% during construction, with the balance due upon completion.

If you are financing your off-plan property through a mortgage, be aware that banks typically cover only 50% of the property’s value, which they release after you have paid the initial 50%. Thus, having enough financial resources is crucial to address these requirements.

Tips for Purchasing Off-Plan Properties in Dubai

To mitigate risks when buying off-plan properties in Dubai, it is crucial to invest wisely. Here is a checklist to help you go through the process effectively.

1.      Verify the Project’s Legitimacy

Before investing, ensure the project is legitimate. According to RERA regulations, only approved projects can be advertised. Use the Dubai Rest app to check all relevant details about the project.

2.      Prioritize Location

Choose the property’s location over its price. Properties in prime areas are less likely to be affected by market fluctuations, which can increase your return on investment once the project is completed.

3.      Understand the Pricing Structure

Many first-time buyers focus solely on off-plan properties payment plans, which can lead to oversight of other important factors and potential hidden costs.

Always inquire about the price per square foot to calculate the total investment accurately. Ensure you have at least 50% of the total amount available in cash, as mortgages typically require this upfront payment.

Also, consider opting for a 50/50 payment plan, where you pay 50% during construction and the remaining 50% upon completion. This approach can provide financial security in case of unexpected events.

4.      Review the Contract Carefully

It is essential to read the contract thoroughly before signing. Similar to RERA tenancy agreements, the contract with the builder includes various clauses that address different aspects of the off-plan property. Take the time to negotiate any terms that seem unfavorable.

5.      Seek Professional Guidance

If you are new to real estate, consider seeking help from a professional. Experienced real estate agents in Dubai can provide valuable insights and guidance on various aspects of the property market.

Off Plan Properties Dubai FAQS

Q: Is It Worth Buying Off-Plan Property in Dubai?

A: Investing in off-plan real estate in Dubai provides several advantages for investors. These include competitive pricing, attractive ROI, contemporary and luxurious properties, flexible payment plans, and high-quality construction, making it a compelling investment opportunity.

Q: Which Areas Have the Best Off-Plan Properties in Dubai?

A: The following are the best areas with off-plan properties in Dubai:

• Dubai South.
• Dubai Hills Estate.
• Business Bay.
• MBR City.
• AKOYA Oxygen.
• Jumeirah Village Circle.
• Dubai Land.

Q: Why Buy Off-Plan in Dubai?

A: Investors in an off-plan property benefit from substantial rental yields, requiring a comparatively lower investment. Rental income serves as a significant motivating factor for property investment in Dubai.

Takeaway

The off-plan property market in Dubai is thriving, attracting buyers who seek the advantages of flexible payment options.

Nevertheless, it’s important to recognize the potential market volatility and risks associated with off-plan properties.

Thus, having a knowledgeable agent to provide guidance can help you navigate these risks and make informed investment decisions.