Off-plan properties have been considered a bit of a dirty word ever since the dark days of the 2008 property crash, when scores of investors found themselves out of pocket due to the crash. Off-plan purchasing, however, is on the rise again this year, as expected.
While most major developers offer generous payment plans for their off-plan projects, restrictions are in place to prevent buy-to-flip investors from pushing up the price for the end-user – the people who actually want to live in the property.
Cash isn’t as important as you think
The good news is that you don’t have to save up 50 percent of the property value as a deposit. Depending on the circumstances, the cash deposit required can be as low as 20%. How? The DDP Property developers are aware most people do not have a 50 per cent deposit to put down on a home, so they are creating payment plans to help people get on the housing ladder. Some of these include 30:70 payments, in which you pay 30 percent up front and the remaining 70 percent upon completion, and many of these plans allow you to pay 10 percent in installments as each phase of the construction is completed.
A property that is off-plan is cheaper than one that is ready
When you purchase off-plan, you can arrange your finances better, and you don’t have to take out a loan for the whole amount of your property. But there are advantages to buying a ready property: with house prices down and tricky off-plan mortgage rules, ready property sales have boomed. It is, however, generally cheaper to buy off-plan (up to 30 per cent below market value) and that gap is likely to widen as developers attempt to drive interest in off-plan investment.
Reputable developers are back in business
Potential buyers may face a stumbling block when buying off-plan in Dubai since UAE banks do not lend to all off-plan projects. Developers’ credentials are an important factor. The big players, such as Emaar, Akoya by Damac, and Azizi, have all secured mortgage financing for their off-plan developments. Your money will also be protected from rogue developers if you choose a reputed developer recognized by the banks.
Property can only be advertised for sale by legitimate developers
Regulations came into effect in October 2016, which require developers and brokers to obtain approval from Dubai’s Real Estate Regulatory Authority (RERA) before they advertise properties. Using the new regulation, we plan to crack down on fake property ads, protecting buyers and real developers alike.
It has been well documented that off-the-plan properties should be avoided, with most leading experts strongly advising against this investment type. In spite of these disadvantages, off the plan properties remain popular investment options, especially among novice investors and first-time homebuyers as they are given ample time to save for settlement. Investing in property off the plan exposes all investors to the same risks and complexities.
I believe the primary risk involved in off-the-plan property purchases is the uncertainty surrounding whether the buyer is receiving a good deal in the first place.
The following tips will help you obtain the best deal when researching off the plan options.