Over the years, the UAE real estate market has been growing at a constant rate. According to latest reports, the market has also recently seen a fall in rental and sales prices making it even more attractive to investors. It is now considered by many to be a buyer’s market and tenants are also enjoying the rewards. This period of rapid development in the UAE means developers are consistently looking for buyers to invest in their off-plan properties.
Buying an off-plan property has its advantages, but those looking to invest should also be mindful of some key considerations before signing any deal.
Think of the future. Shortlist the areas you would like to live in and what you will need access to such as a supermarket, school, fitness centre, beach and so on. Make sure you consider the general infrastructure around the development. All new developments should have accessible basic amenities, so make sure that you have seen the development plan to ensure these are in place.
Also, look out for smart technology embedded into new homes that can simplify your day-to-day living.
Track record of the developer
When you start the process of deciding which off-plan property to buy, conduct thorough research of the developer’s track record. It is also worth visiting the developer’s completed projects to check for quality and deliverables.
With all developers, you should also be sure to check the show homes. Make sure all deliverables are signed on official papers as proof of your agreement.
The biggest advantage of buying off-plan is that you can stagger the payments as per the progress of the construction. One option to help with your purchase is to take out a bank loan. The maximum loan-to-value (LTV) ratio during construction period is 50 per cent, so you need to pay at least half the value before a bank can finance the property. Be mindful that you might already be paying rent or a mortgage on the current property that you live in.
Some off-plan properties in the UAE also offer a structure of paying a certain amount of the down payment first and paying the majority of the balance payment upon handover of the property. Also, be sure to double check that all payments are directed towards the project’s escrow account and not directly to the developer.
Handover and completion date
The most common issue that a lot of buyers face when buying off-plan property is the delay in the handover. Therefore, real estate authorities in the UAE have introduced strict regulations that must be met by a developer before selling units in a project. These include complete ownership of the land the property is built on, a 20 per cent payment as bank guarantee, a deposit of 20 per cent in escrow or to reach 20 per cent of construction — this depends on the emirate in which the property is located in.
Your off-plan sale and purchase agreement should mention the project’s expected completion date, along with how the developer will address and compensate you for any delay, which is often expected.
Off-plan properties are a very attractive for buyers. There is no right or wrong in doing this — it mainly depends on the buyer’s preference. Be patient because you will not see immediate returns on your investment. However, the positive aspects include attractive price and financing offers and the ability to decide how much you can afford monthly as payment if you have taken a bank loan.
Kaizar Patla is head of consumer assets at ADCB. The views expressed here are his own.