Advantages and Disadvantages of Investing in Off-Plan Properties in Dubai
With its vibrant economic activity, sound political infrastructure, and lucrative returns on property investment, the city of the rich and famous is known to be a haven for buyers looking for opportunities in the Dubai real estate sector. Yet, buying property in Dubai can also be exhilarating for investors who find themselves struggling between resale and off-plan investments with far too many options available ranging from urban settings in the ever-popular Downtown area to more scenic beaches views on Palm Jumeirah or the newly pop-up communities on the outskirts of Dubai.
WHAT IS AN OFF-PLAN PROPERTY?
An off-plan property also referred to as ‘off the plan’ is a property that is yet to be constructed but is already available for purchase either directly from the developer or the first owner.
In recent years, off-plan real estate in Dubai has been positively buzzing with activity hence setting a new trend in the region amongst both local and international buyers. While buying off-plan properties in Dubai has its range of advantages, it also carries certain risks. Henceforth, buyers need to carefully weigh the pros and cons to protect themselves.
WHAT ARE THE PERKS OF INVESTING IN OFF-PLAN PROPERTIES IN DUBAI?
#1 - Relatively Low Price with Flexible Payment Schemes
One of the most obvious benefits of investing in off-plan sales Dubai is the attractively low prices with feasible interest-free payment plans compared to ready properties. The payment schemes can vary from developer to developer but generally lies between 10-20% down payment with a Sales Purchase Agreement (SPA) to secure the off-plan property.
#2 – Promising Capital Gains in terms of Return on Investment
Buying an off-plan property can be advantageous for buyers looking to invest in Dubai on properties below-market-value (BMW) price thus benefiting from return on investment (ROI) once there is a rise in the market value. Additionally, with off-plan investments, investors not only get higher capital appreciation as the property reaches completion but also have the privilege to choose the best apartments in a particular locality or popular neighborhood without necessarily overshooting their budget. These factors play an essential role in market value appreciation.
#3 – Brand New Residence with Personalized Fixtures & Fittings
It is always pleasurable to live in a brand-new property with the control to design every aspect of it with a personal touch. If done right, investors can pick lifestyle features with the latest design and technology which can boost the property’s appeal and value for any future resale plan.
#4 – Buy Off-Plan Dubai Yields Higher Rental Returns
The vibrant city of Dubai has been the land of opportunity for expats and has shown no signs of slowing down. More and more investors are opting to invest in real estate to earn a decent rental income and gain financial security.
#5 – Regulated Laws to Protect Investors in Dubai
The RERA (Real Estate Regulatory Authority) and Dubai Land Department (DLD) took several measures to protect investors against delays, cancellations, or scams. Buyers must make all payments regarding off-plan properties at DLD-approved banks and developers will only be allowed to access those funds once the project reaches a certain level of completion. Moreover, RERA and DLD demand that developers deposit 20% of the project cost as a bank guarantee with an additional 10% guarantee performance bond by the contractor.
WHAT ARE THE RISKS OF INVESTING IN OFF-PLAN PROPERTIES IN DUBAI?
#1 – Fluctuating Market Condition
The unstable Dubai property market is a major risk factor. Anything can happen between the time the investor purchases the property and the time he receives the keys. If the price of the real estate market moves downwards, the property will be worth less than what the buyer paid for.
#2 – Delayed Handover or Cancellation of the Project
Very often the schedule is not always respected, and construction delays can happen. This can be a hindrance for the buyers who are currently leasing and planning to settle in their new home at a given period. Another risk is that the developer goes bankrupt before the completion which will cause the buyer to lose all the money he has invested so far. It is recommended to research the project developer and ensure any signed sales agreement mentions how the latter will handle the situation in case of delay.
#3 – Expectations in terms of Quality
Research on the developers will also help investors to check the track record and understand the quality of the properties delivered. In off-plan sales Dubai, buyers usually base their decision to buy on brochures or some floor plans, and very often the results might be different based on the quality of materials used for construction.
#4 – Minimum Threshold Imposed by Developers before Selling Off-Plan Property
Nowadays, upon buying off-plan properties in Dubai, investors encounter restrictions on behalf of developers to sell their units until a certain percentage of the total price is paid off. Therefore, it is best to check the minimum imposed threshold beforehand.
#5 – No Immediate Return on Investment
As compared to ready property, the off-plan property does not generate immediate returns since it is still under development. Consequently, buyers can neither move in nor lease out immediately.
There are two sides to every coin; nevertheless, it is important as an investor to weigh the multiple factors and analyze the market condition before making a sound investment decision in Dubai. Have a look at some of our most popular off-plan communities in Dubai.
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