Why It Is Profitable to Buy Real Estate in Dubai at The Stage of Development

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Off-plan property – it is a not finished property bought directly from a developer, rarely from a first owner. In the first case, the first installment is usually around 10-20%. After it, the buyer signs SPA (Sales Purchase Agreement). Thought the size and schedule of the rest of the payments vary from developer to developer, they are usually linked to construction.

In 2019, the off-plan property transactions were less than 40% of Dubai’s construction market. It shows that this type does not fit all the investors. Indeed, this kind of development is best suited for investors; end users may want to get their property as soon as possible. But if waiting for a future house is not in issue, off-plan property is an excellent opportunity to purchase a real estate at the lowest prices possible.

In 2020 in Dubai, the average price for an off-plan property sq ft is 719AED compared to 1,304 AED per sq ft for a ready property. Almost two times less! It again proves how significant investors can profit from investing in such kind of development.

Advantages of off-plan property

  1. The primary advantage, of course, is savings. Buying property with off-plan allows an investor to get the lowest possible price.
  2. To sell before the project is completed. It is often a situation when investors can find a buyer prior to the handover of a project. It certainly brings a significant profit, if to assume that the project became popular and the market performed well.
  3. The chance to choose the best apartment. Getting to choose first allows picking the best option from the available ones, which increases the possibility of maximizing the return on the investments.
  4. To get a lower front cost. With some developers, the down payments start with only 5%, and the rest are linked to construction. It makes the expenses very low.

Possibility to get a property in a prestigious development. There are magnificent properties available for off-plan in Dubai, such as

  • Se7en Residences in Palm Jumeirah.
  • Pantheon Elysee in Jumeirah Village Circle (JVC).
  • Downtown Views II in Downtown Dubai.
  • Golf Place or Maple Townhouses in Dubai Hills Estate.
  • District One Residences, Mansions, and villas in Mohammed Bin Rashid (MBR) City.

All of these projects are likely to be sold out shortly before their completion, so the off-plan property is an excellent opportunity to get a property in these developments in Dubai at the lowest price possible.

What are the risks of off-plan property?

  1. Delay in the project handover. Sometimes construction does not go as planned; some developments were not completed on the listed dates. But it is easy to avoid this risk with the proper research of the developer, its previous projects, and reviews.
  2. The shift in the market. Economic cycles are unpredictable. Any little reason can reduce property prices, and property will cost less than the original price. It primarily affects the off-plan properties, as they are more difficult to liquidate.

Costs and Fees of purchasing an off-plan property

For buying an off-plan property, Dubai Land Department charges to fees:

  • Property Registration Fee at a rate of 4% of its stated value.
  • Oqood Registration, its amount is AED 3,000.

Nevertheless, it is a regular practice within an off-plan purchase for Dubai developers to pay some, or sometimes all of the fees.

When can the off-plan property be sold?

Dubai’s market is secure to invest in due to numerous measures being taken to ensure its stability. One of them is to prevent suspicious activity around off-plan. Many developers set a certain level of payment that needs to be done to be able to sell.

For example, one of Dubai’s largest developers, Emaar Properties, requires 40% off-plan property paid before the owner can sell it. Once this requirement has been met, the process of selling an off-plan property is very similar to selling a ready property. After the price and terms of purchase has been agreed, the buyer and seller sign contracts and apply for a No Objection Certificate (NOC) where the new buyer is registered with the developer. After the transfer is complete, new owner takes over all the outstanding payments.

How to guarantee that the projects will be completed?

The Real Estate Regulatory Authority (RERA) established many regulations for developers to ensure that project will be completed. To meet these directions, the developer, for example, must:

  • Own 100% of the land belonging to the project.
  • Submit a 10% performance guarantee.
  • Meet one of the options:
    • To finish 20% of construction before starting the sales.
    • To make a down payment of 20% of project value in a bank as a guarantee.
    • Or to put 20% of property value in an escrow account.

However, the best way to guarantee your investment is to get a property from a known developer with an impeccable reputation.

Examples of the off-plan property payment plans

District One Residences in Mohammed bin Rashid City

It is a gated waterfront community that offers 1 to 3 bedroom apartments, located in picturesque surroundings with world-class facilities at the doorstep. The floor to ceiling windows provides not only natural sunlight throughout the whole day but as well the stunning panoramic views. The community offers such amenities as local parks, commercial centers, nursery & kindergarten school, clinic& health center, community hall, and a spectacular 7 km crystal lagoon. The development is perfectly located:

  • 2 km to The Tack Meydan Golf
  • 4 km to Downtown Dubai.
  • 8 km to Jumeirah Beach
  • 14 km to Dubai International Airport (DXB).

Executive Residences in Dubai Hills Estate by Emaar

Emaar is one of the biggest and most trusted developers in Dubai. Their projects are an excellent example of secure off-plan property purchase. Executive Residences is just one of the numerous options on which their off-plan property plan can be presented. It’s planned to be completed in the second quarter of 2021.

Executive Residence is the most awaited residential/commercial project in Dubai. It was proved by the DMCC Free Zone authorities to be a free zone business area that gives its investors 0% Personal and Corporate Income tax, 100% Business ownership, and a 100% Capital Repatriation. Besides that, they have a possibility to get a Free 3 Year Renewable Business License together with a Free 3 Year Renewable Family Residence Visa after just a 20% payment in advance.

The development offers such superior facilities as a health center, Business Cafe, Zen&Yoga Center, Edge Pool, Meeting Rooms, and numerous parks and resting areas. It is located next to the Dubai Hills Boulevard and Dubai Hills Park.

Summary

Off-plan property is a great investment in Dubai. It gives you numerous advantages:

  • Lowest possible price (by statistic almost two times less than a ready property).
  • Possibility to choose the exact unit and location that you want.
  • Avoid fees involved in buying ready property.
  • Use beneficial off-plan property payment plans offered by developers.

There are risks involved as well, but thorough research of developer’s history can easily avoid them.

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