Buying Off Plan Properties in Dubai? – Here’s What You Need To Know
Dubai’s landscape is forever changing as it has claimed its rightful place of the premier lifestyle destinations in the world. From the vibrant city center to its expanding coastline and marvelous man made islands, Dubai is becoming the hub of various beautiful new neighborhoods that will reshape the face of luxury living in the world.
Off plan is a property before a structure has been constructed on it. They are the best opportunity to acquire the newest and most exclusive properties in Dubai through which investors can reap a handsome amount of profit. Exciting new off plan properties Dubai are in development throughout the city, some in already established and popular districts, while others are part of upcoming projects.
Buying off plan properties Dubai has its own risks and perks. The main benefit that attracts investors is definitely a lower price. Developers usually offer between 10% to 30% lower prices for off plan properties Dubai. The closer to completion the under construction project is, the higher the asking price becomes.
These days developers are attracting potential buyers with some attractive and flexible payment plans. They are giving possession of the plot with only 10% of payment. While some of the master developers still demand and receive up to 80% during the construction process, the most popular payment plan these days is 50% during construction and 50% at completion. There are some risks which you have to keep in mind when you consider purchasing off plan properties Dubai.
Project delays:
Project delays are one of the most common issues with buying off plan properties Dubai. More than 50% of the projects launched in UAE since 2008 have been handed over at least one year later than quoted, some faced considerably more delay and some have been even cancelled. Off plan properties Dubai payment schedules these days should be linked to construction milestones so the part of the risk relating to delayed handovers are somewhat minimized.
Quality risk:
The brochure and display suite look amazing but will the developer cut the cost and deliver a product that is lesser than expected? Well known developers trade on their reputation and understand that the quality of their finished product will directly affect their brand value and future sales. While others care less about the quality factor.
Market risk:
The UAE real estate boom and bust cycles have been mostly driven by hype and herd mentality, rather than supply and demand factors.. This is changing as the market matures. Market risks are there in all real estate markets across the world. When buying off plan properties Dubai you risk a general decline in real estate values between the time when you pay the booking fee and when you receive the keys. But in most cases the opposite is true. Usually prices go up and you can leverage big gains on a relatively small deposit.
Change of your financial circumstances:
When buying off plan properties Dubai you need to pay 20% to 80% during construction with the rest due at completion. Most common practice these days are the 50/50 payment plans. If you plan to pay the whole amount in cash your concerns are limited but if you require a mortgage to complete the payment, there is the risk that your financial circumstances may change in future. You might lose your job, interest rates might increase or the banks may alter its policies. And even if you qualify for a loan, the bank may not lend you the amount you require.
To avoid this risk, in selected off plan properties Dubai you can apply to borrow up to 50% of the purchase price which is pre-approved at the time of application and is guaranteed to be paid at completion. So regardless of what happens to your personal financial situation, assuming you can pay 50% in cash, you can be confident of getting the funds you need to complete the purchase. Not all developers and projects are eligible so you have to do some market research. Every bank has its approved off plan properties Dubai developer or project list. Some will offer finance for off plan properties Dubai in selected projects while others will not. Talking to a qualified mortgage adviser before you take the step is advisable.
After completion:
For completed off plan properties Dubai under AD 5 million you can apply to borrow up to 75% of the property value and 80% if you are a UAE national. Which means that if you paid 50% cash during construction you can take 25 to 30% cash out.
All of the aforementioned factors need to be taken into equation before purchasing off plan properties Dubai to have a safe investment and get the most out of it.