Investing in Off-Plan Property
Property prices are picking up in Dubai making it difficult for people to purchase their dream homes. Buyers are making compromises and settling for smaller units to fit their budgets or looking for property in a different location. However, due to the regained confidence in the market, many people are once again now turning to off-plan property to make their dreams come true.
Follow the following tips to make an informed and safe discussion about purchasing an off-plan property and why investing in such a property is not a bad idea anymore.
• Review the Property Properly
Know the exact location, size and specifications of the unit you propose to buy. Buyers often do not review information about the particular property and make a decision based on the location, floor number and sometimes only on the basis of the illustrated image of the property, ending up getting something else other than what they paid for.
• Review the Developer Thoroughly
Knowing the credibility of the property developer is very important and can significantly reduce the risk of loss. Buyers can protect their investment by reviewing the reliability of the developer and knowing aspects such as the developer’s experience with past projects, the developer’s financial condition and the background information of any joint venture partners. Looking at the developers past completed projects also provides a very good indication of how their new purposed property development could end up as. The buyer should also make sure that the money is going into an escrow account rather than to the account of the developer.
• Learn about Banks and Financing Options
Buyers interested in financing their purchase with a bank should know the financing options offered by their preferred banks. The central bank allows banks to provide 50 per cent of financing for all off-plan properties. However, in practice most banks have a tendency to back properties that are nearing completion or are at least 70 to 80 per cent completed. Asking your bank if they have a preferable off-plan development project they are more willingly to finance is one way of finding out your options. In addition, many developers have approved banks that offer competitive rates.
• Read the Fine Print
Read the contract before signing very carefully in a thorough manner. Know the fees that are usually stated in the contract and do not be afraid to ask questions and clarify your doubts. Buyers have a tendency to overlook key points regarding fees and clauses around defaults or late payments, which could potentially leave them vulnerable at the hands of the developers.
Why invest in off-plan property?
Many people think that buying off-plan property is not safe and an accident waiting to happen. Moreover people are over cautious and invest only with very big developers leaving aside other good investment opportunities with lesser known upcoming developers – ending up paying high premiums for a property worth much less and ignoring better high quality inexpensive properties.
However, tougher stands by the authorities regarding off-plan property with increased regulation around escrow accounts and project refunds for delayed completion have made developers more responsible for delivering the projects within the agreed timelines and standards.
An advantage of investing in an off-plan property is that it offers lower rates than those of ready property due to the fact that the property is not ready for immediate usage.
Another advantage is that off-plan property offer flexible payment plans allowing the investor to make payments in installments until completion and handover as compared to ready properties where one has to pay a lump sum amount immediately.
Other Facts and Figures:
The developer must buy the land, paying 100% in full before starting construction of the project.
The developer must have 20% of the value of project in the escrow account before the start of the project.
The off-plan property can only be sold by the buyer after 30-40% of the payment has been made depending on the developer.