The real estate market in the UAE is one of the biggest in the world and offers unlimited opportunities for investment. Another good thing is that buyers can choose from many types of properties, including those ready to move into and those still being built (off-plan).
“Off-plan properties” is a very popular term in Dubai real estate and recently, off-plan properties have become even more popular with buyers and investors. This rise in interest is mainly because of the flexible payment options and the potential for profit once the project is completed.
Today, we are going to talk about an important aspect of off-plan properties; how to buy off-plan properties in Dubai and UAE. The overall process is almost similar in all Emirates with possible slight changes vary from emirate-to-emirate.
What is Off-Plan Property in Dubai?
An off-plan property refers to any property bought directly from the developer while it is still being built. This could mean the property is yet to start construction or is only in the early stages. Buyers of off-plan properties typically need to make their decisions based on the blueprints or floor plans provided by the developer.
Usually, buyers are required to make a down payment, which is a percentage of the total property price. The remaining amount can often be paid in installments or in a way that both the buyer and developer agree upon.
How to Buy Off-Plan Property in Dubai—Recommended Steps to Follow
Here are the key steps to follow when buying an off-plan property in Dubai and UAE.
1. Set Your Budget
The first thing you need to do when buying an off-plan property in Dubai or any other Emirate is to set a budget. It helps to break down the costs into three main categories: the down payment, installments, and legal fees.
The down payment is made before you sign the sales and purchase agreement and usually ranges from 10% to 20% of the total price. Keep in mind that banks typically will not finance this down payment, so you will need to save up for it on your own.
Next, consider the ongoing costs of installments and legal fees. If your monthly income can comfortably cover your household expenses along with these payments, then an off-plan property might be a good option for you.
2. Talk to a Real Estate Agent
Once you have your budget in place, the next step is to consult a real estate agent. Hiring a certified real estate agent comes with many advantages. They have the experience and knowledge to guide you through the entire process.
A real estate agent can offer insights about the project and help you estimate the property’s market value after it is completed. They usually have connections with developers, which can be beneficial for negotiating the final price and installment terms.
3. Gather Project Details
Buying an off-plan property is a long-term commitment, so it is important to gather all relevant information about the project. Make sure to check the developer’s reputation, their past projects and their completion dates, any legal issues, and land lease agreements. Doing this thorough research will help you avoid problems down the line.
4. Choose a Payment Plan
The final step is to decide on a payment plan. Developers usually offer different options, and these can vary based on how much you will pay after the down payment.
Select a plan that fits your budget. Be sure to review the interest rates, completion timelines, and any hidden costs before you sign the contract.
Read more about off-plan property payment plans in Dubai.
5. Handle the Legal Steps
After finalizing your deal with the developer, you will need to complete a few important legal steps:
a. Get the Reservation Form
The first step is to obtain the reservation form. This legal document includes your personal information, the type of property you are buying, the payment structure, and the down payment amount. Both you and the developer need to sign this form before moving on to the next step.
b. Sign the Sales and Purchase Agreement (SPA)
Signing the Sales and Purchase Agreement (SPA) is a crucial part of buying an off-plan property in the UAE. The SPA outlines important details like the property’s price, handover date, layout, and payment plan.
This signed document acts as a formal agreement between you and the developer—read it carefully. Look for any hidden fees or unfavorable conditions, and verify the developer’s information and all property details. Do not forget that you must register the Sale and purchase agreement with local authorities, such as TAMM in Abu Dhabi or DLD in Dubai.
c. Deposit Money in an Escrow Account
Once the SPA is signed, you will need to transfer the down payment to the developer. They should provide you with an escrow account where your funds will be held.
To ensure the escrow account is legitimate, visit the official website of your local authority. For example, residents of Dubai can check the DLD’s website for verification.
After confirming the account, you can transfer the funds using a credit card or wire transfer.
d. Pay the Brokerage Commission
If you have worked with a real estate agent, remember to pay the brokerage commission after transferring the funds. This fee can vary depending on the overall property value.
e. Inspect the Property Before Handover
It is a good idea to visit and inspect the completed property about a week before the handover date. During this inspection, check that the finished property meets your expectations based on what the developer promised. Look closely at the finishing touches, paint, interiors, and materials used. If you notice any discrepancies, you can ask the developer to address them before you take possession.
Documents You Need to Buy an Off-Plan Property in UAE
Here is a list of documents you will need to buy an off-plan property in the UAE.
- Copy of your Emirates ID
- Copy of your passport
- Reservation form
- Sales and Purchase Agreement (SPA)
- Mortgage contract (if applicable)
Keep in mind that this is a general list, and the specific Emirate you are in might require additional documents.
Important Considerations Before Buying an Off-Plan Property in Dubai and UAE
Off-plan properties are quite popular for their potential investment returns and profit margins. However, before making a decision, there are several important things to consider when buying off-plan property in the UAE.
1. Choose a Reputable Developer
Investing in an off-plan property is a long-term commitment, as you will be paying the remaining balance in installments. It is crucial to check the reputation of the developer before proceeding. Make sure to invest only in registered projects from licensed developers.
You can verify a developer’s credentials by visiting the official websites of relevant authorities. For example, residents of Dubai can check through RERA or DLD, and the Dubai Rest App also offers digital verification. If you are looking at a project in Abu Dhabi, it should be registered with TAMM.
2. Visit the Project Site
Once you have selected a project, it is a good idea to visit the site in person. This will give you a better understanding of the layout and space of the property. You can also assess the construction progress and the quality of materials used.
3. Assess the Return on Investment (ROI)
ROI is a crucial factor when investing in an off-plan project. It can vary based on location, property type, the developer’s reputation, and the rental potential of the unit. Be sure to take all these aspects into account before making your final decision.
4. Prioritize Location Over Price
When looking for an off-plan property, location should be a top priority. While properties in prime locations might be more expensive, they usually offer a higher ROI in the long run.
Ideal locations often include beachfront properties or areas that are newly developing. If you choose a property in a more established area, check for nearby public transportation options like metro or bus stations.
5. Negotiate the Payment Plan
Developers typically offer a variety of payment plans for off-plan properties, each with its own pros and cons. Take the time to negotiate the terms and installment amounts to fit your budget. Remember, failing to make timely payments can put you in default, and you may face penalties for late payments.
6. Carefully Review the Contract
After addressing all the above points, you will be ready to sign the Sales and Purchase Agreement (SPA) with the developer. Before you sign, make sure to read the contract thoroughly. Look for any terms or conditions that you might not have agreed to. Pay special attention to any asterisk symbols (∗), as these often indicate hidden clauses within the contract.
What do for Delays in Off-Plan Property Handover?
Delays in off-plan property handover are possible due to different reasons. However, how to handle off-plan property delays is important. Here are a few things you can do.
1. Paperwork and Fee
When dealing with off-plan property in Dubai, it is essential to ensure all fees are paid and the paperwork is complete. Incomplete documents or missed payments often cause delays in the handover process, so fulfilling your contractual obligations is crucial.
2. Visit the Project’s Site
Next, visit the project site to check its progress and communicate with the developer about the expected completion date. You can also find updates on registered properties by visiting the Dubai Land Department (DLD) website.
3. Discuss Potential Solutions with the Developer
If there are delays, discuss potential solutions with the developer. Review your Sales and Purchase Agreement (SPA) for any clauses related to delays, as this can inform your discussions.
4. Be Aware of the Project Cancellation
Be aware that the Real Estate Regulation Authority (RERA) in Dubai can cancel off-plan projects for specific reasons. Check the DLD website to determine if your project has been canceled or if there are any regulations concerning delays. If a project is canceled, it will go to the liquidation committee for resolution.
5. Look for Legal Assistance if Needed
If your property’s handover is significantly delayed, consider seeking legal assistance. If negotiations are not fruitful, you can file a case for compensation or even terminate the contract, depending on the SPA terms.
Developers typically have a one-year grace period for completion, and you may claim compensation for delays. Consult a property lawyer experienced in these matters, but remember that legal action should be the last option after exploring other options.
Frequently Asked Questions
Are off-plan properties more expensive than ready-to-move-in projects?
No, generally, off-plan projects are less expensive as compared to the ready-to-move-in properties. They offer flexible payment plans, can generate high returns, and the property value usually increases. However, there are still risks related to off-plan properties.
Can I sell my off-plan property before completion?
Yes, the buyer can sell an off-plan property before completion. However, there are certain conditions that may vary based on the buyer’s contract with the developer.
What happens if I fail to pay my off-plan property installments?
If you miss your installment payments, the developer may impose penalties. Moreover, if your payment is delayed for an extended period, the contract could become void, allowing the developer to sell the property to someone else. In this case, you will receive the amount you have already paid after a specified time, as outlined in your agreement.
Summing it up
So, this was our guide on how to buy off-plan property in Dubai or UAE. The process can be overwhelming and that is why, it is better to hire a real estate firm or an agent for smooth sailings, if you are in search of off-plan projects in Dubai, feel free to reach out. You can also visit our blog post on best areas to buy off-plan property in Dubai.