Real estate is one the key anchors for Dubai’s economy. Today, buying property in Dubai is a relatively straightforward process and is generally well regulated. There are legions of property developers aggressively looking to entice you into buying an off-plan property project in Dubai with seductive offers and incentives.
Whilst buying an off-plan property project in Dubai can be a very exciting process, no off-plan property project in Dubai comes without an element of risk. So what are the things to consider before buying an off-plan property in Dubai?
Let’s explore the Top 5 things to take into consideration before you take the leap and become an off-plan property owner.
Top 5 Things To Consider When Buying An Off-Plan Property Project In Dubai
- Location, Location, Location
We have all heard the saying ‘location, location, location’. When it comes to buying property it’s the very firth issue to consider. Do your research into projected demographics for that area, accessibility and transport links, proximity to sea or Dubai’s centre, as well as places of interest and shopping outlets.
These are all crucial factors, which will shape how successful your development may prove to be which in turn will be reflected in its future property value. If you are buying an off-plan property project in Dubai for investment purposes you need to consider factors such as likely rental demand, population growth, and area price trends.
The last thing you want to do is buy an off-plan property project in Dubai, which you intend to lease only to discover the area you have bought into is an area which has low rental demand. Alternatively, if you are buying a property as an owner-occupier, you need to look for the right mixture of amenities, facilities, and access to services, which are important to you and your lifestyle.
- Developer’s Track Record
The next phase of your research should be an in-depth review of your prospective developer’s track record in delivering off-plan property projects in Dubai, successfully or otherwise.
Choosing the right developer is a crucial decision and will go along way to ensuring you ultimately receive exactly what you paid for and expected upon hand-over. There is no short-cut to basic research.
Finding out as much as you possibly can about the different developers under consideration, will help you sift the sharks from the reputable companies you ultimately want to invest with.
Consider the developer’s size, financial depth, reputation, time in the market and most importantly track record. Look at the developer’s previous off-plan property projects in Dubai.
Were they completed on time and to specification? Did the developer deliver on their promises? Are their previous buyers happy? Many property developers promise you the world but fall short when the rubber hits the road.
Answers to these types of questions will give you a sound indication as to whether your prospective developer is likely to deliver against their promises, or whether your development has the potential to transform into a living nightmare.
- Payment Terms
One of the biggest attractions of buying an off-plan property in Dubai is the opportunity to manage your cash flow and financial risk by staggering your payments over a period of time.
Moreover, depending on when you invest, your initial cash investment can prove to less than the ultimate value of the completed property delivering you a nice bonus in the form of a modest capital gain.
Whilst most traditional payment plans are linked to construction, for example, you may be asked to pay 30 percent of the off-plan property price on signing, a further 30 percent upon completion and the residual upon hand-over, many developers are now more creative and offering new and more attractive options to woo buyers.
One of those new payment options includes ‘post-handover’ payment plans. A post-handover payment plan contains a component; usually, around 40 percent of the property cost, which is paid over a period of time after the property is handed over.
This allows the buyer to use the property, either as an owner-occupies or leased out, before making full and final repayments to the developer. Payment plans structure on this basis is not surprisingly, becoming increasingly popular.
They allow new buyers to enter the property market and purchase a property they may not have been in a position to purchase under previous payment structures. As with more traditional payment plans, however, it’s crucial to budget accurately to ensure you are in a position to meet your payment obligations as laid out in your contract.
- Assess your Financial Situation
When you buy an off-plan property project in Dubai, somewhere between 20 and 80 percent of the total amount is usually payable upfront, with the final amount falling due according to a payment schedule. The most common payment plan is currently an even 50/50 split.
Regardless of which payment structure you are able to negotiate with your developer, you need to be clear about being able to meet your contractual obligations.
Understand the risks associated with your project and have contingency plans to hand to ensure you are always in a position to meet your payment obligation as and when they fall due prior to making the plunge.
- Understand Your Purchase Contract
This where the rubber hits the road when it comes to buying an off-plan property. In Dubai, there is no standardized purchase agreement or contracts governing property purchases.
When buying a property, you sign a private contract provided by the developer. Never sign a contract unless you understand the implications of its provisions. Similarly, never sign until all the contractual terms are been settled and are fully transparent to you.
Upon signing the contract, you pay your deposit as specified by the contract to the seller and supply the necessary documentation. The contract should clearly set out the schedule for the residual payments.
Make sure your deposit and subsequent payments are paid into a Real Estate Regulation Agency (RERA)-approved securities account. In these accounts, the money is gradually released to the developer upon completion of set construction stages