Prospective buyers have the option to select a property that is still under construction, commonly referred to as an "off-plan" property. This category of real estate has witnessed substantial demand, accounting for 40.4% of all property transactions in 2021 and nearly 45% in 2022. Moreover, last year marked a record-breaking performance in the real estate market. Statistics indicate a significant surge in sales volume in 2022 compared to 2021, with profits soaring by 78.3% and the number of transactions increasing by 62%. Let's delve into the reasons behind the allure of off-plan properties for investors and explore the potential hidden risks associated with purchasing this type of housing.
Pros of Buying Off-Plan Property
To begin with, off-plan properties often come with attractive pricing, with the price differential between off-plan and ready-made housing sometimes reaching up to 20%. This means investors can potentially realize a significant profit upon selling the completed property.
Secondly, off-plan property transactions are regarded as one of the safest options available. In accordance with Emirates laws, investors' funds are held in dedicated escrow accounts. Typically, the buyer initially pays 70% or 80% of the property price, with the remaining amount due upon completion of construction.
Developers can access the funds only after submitting a progress report to the Land Department of Dubai. Furthermore, they can proceed to the next construction stage only upon the full completion of the previous one. Occasionally, a developer may face impediments preventing the resumption of construction. In such instances, the state authority organizes a tender, allowing another developer to step in and complete the construction.
New buildings in the UAE
Thirdly, you have the option to purchase such properties on favorable terms through mortgages or installment plans. Banks in Dubai offer housing loans with annual interest rates ranging from 4% to 6%. The minimum down payment requirement is just 5%. These housing loans are accessible to both residents of the country and foreigners.
You don't need to be physically present in the Emirates or open an account with a local bank to apply for a loan. Many financial institutions accept documents and conduct transactions remotely through their official websites. You can use credit funds to purchase various types of real estate, including apartments, townhouses, or villas.
Risks of Buying an Off-Plan Property
The stability of the UAE's financial system significantly minimizes risks associated with purchasing off-plan properties. However, there are a few intricacies to consider, such as buying real estate with a mortgage as a non-resident, which may involve certain restrictions imposed by banks. For non-residents, the most favorable option often involves utilizing installment plans, allowing payments to be made upon completion of construction.
Another important consideration is that you typically cannot resell your off-plan property until you have paid a specific amount, typically ranging from 20% to 40% of the property's price. These terms are typically outlined in the sales contract. Beyond this requirement, there are few other significant issues that buyers of off-plan properties might encounter.
What is Pre-Launch in Off-Plan Deals?
Apartment sales often commence during the design stage, before the official market launch. This phase is known as "pre-launch," which essentially involves reserving properties without completing the transaction. At this point, the property exists only on paper, and there may not even be a foundation pit on the construction site.
If the buyer is satisfied with the design, they can proceed by making a down payment and completing pre-registration. Once the official sales phase begins, the developer enters into a contract with the prospective owner, and the funds are deposited into an escrow account in installments.
Any Interesting Off-Plan Properties in Dubai Today?
One of the most remarkable projects is Creek Edge, a multi-storey tower developed by the reputable company Emaar, situated in the city center. This new building offers spacious one-, two-, and three-bedroom apartments, with unit floor areas starting from 64 sq. m and prices beginning at 1,280,000 AED. For this price, buyers can enjoy luxurious housing with views of the promenade and the city, as well as access to a panoramic pool, playgrounds, and fitness facilities. Completion is scheduled for early 2024.
If you are seeking premium housing, we would like to highlight Cavalli Couture. This 12-floor building offers comfortable three-, four-, and five-bedroom apartments, along with an exclusive six-room penthouse. Each floor of the building will feature a private pool with an outdoor patio, providing a breathtaking view of the Dubai Canal. Additionally, the building is conveniently located near the city center and Safa Park. Apartment prices start at 16,500,000 AED, and the project is slated for completion in early 2026.
In a Nutshell
Investing in off-plan property presents an excellent opportunity to acquire your own home at an affordable price while also serving as a promising investment. These transactions are closely regulated by legislation, ensuring their safety. Furthermore, the option to purchase housing under construction in installments is accessible to foreign citizens as well. If your dream is to reside in one of the world's most beautiful cities, now is the ideal time to consider purchasing off-plan property. This strategy not only offers cost savings but also anticipates potential future increases in housing prices.
Cover photo: cliff hellis (Flickr)