March 2023

Dubai Off Plan Properties – Unfinished properties in the real estate market are referred to as being “off the plan,” as it is known to investors. Off-plan or “off the plan” properties are often bought from developers directly (primary market). Though investors may also be used occasionally (secondary market). Due to its numerous advantages—benefits that extend beyond significant price cuts and flexible payment options. It presents investors with exhilarating chances. Dubai Off Plan Properties!

Nevertheless, there are benefits and drawbacks to purchasing an off-plan house in Dubai, just like with all real estate transactions. Before traveling that way, there are a lot of things to know.

The definition of off plan or “off the plan” properties, the necessary legal paperwork and regulations, potential hazards, advantages, and everything else you need to know to make a profitable investment in the Dubai real estate market are all covered in this review.

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Documents and Legal Requirements for Purchasing Off-Plan Real Estate in Dubai

The amount of paperwork and legal processes required for real estate investments can be challenging for investors, particularly foreigners. However, having a guide or agent can make things somewhat easier.

In order to complete the process of purchasing an off-plan property in Dubai, a few documents are required. These records consist of:

– A valid copy of an Emirates ID

– Passport copy

– A copy of visa page

– A booking form

– Purchase and Sale Agreement (SPA)

– Mortgage agreement (where applicable)

In the early phases of the negotiations, especially while making reservations, some of these documents might not be required. The buyer must nonetheless give all of them to the developer and the DLD for proper identification as the purchase moves toward an official agreement.

The legal procedures and paperwork you will need to deal with when purchasing an off-plan house in Dubai are listed below.

Reservation Form 

The form asks the buyer for personal details including contact information, the kind of home they want, how much they want to put down as a down payment and how they want to pay it off.

For your assurance that the reservation form is a legitimate document. It must be fully stamped and signed by the developer. Of course, this shouldn’t be a problem if you work with an RERA-certified agent.

Purchase and Sale Agreement (SPA)

The sales and purchase agreement is a crucial contract that determines how the entire acquisition will proceed. At this point, all parties should have made considerable strides and be heading toward the conclusion of the contract. This agreement incorporates important data like:

– The payment plan

– The purchase’s conditions

– Minimum initial deposit amount 

– Mortgage contract

– Amount of deposit that must be made before the investor can resell the off-plan property to another buyer.

The SPA for off-plan properties is often accepted by the DLD in a specific format. But you shouldn’t rush to sign the contract. Before you put pen to paper, take your time to carefully study every sentence. If there are any deviations or locations where you need to ask the developer for revisions, an expert agent can provide you with all the assistance you require.

Registration Fee

It costs money to reserve an off-plan property, which the DLD mandates for investors and developers. The registration fee, which is equal to 4% of the total cost of the property, is typically paid in the form of a manager’s check.

Of course, your agent can provide guidance on how to proceed for foreigners who do not yet have an account in Dubai. As a substitute, the developer may figure out a means to get the investor to pay the charge and then send the money straight to the DLD on the investor’s behalf. Before the DLD formally accepts the reservation, the buyer is required to make the payment

Process of Buying Off-Plan Property in Dubai 

The process of buying off-plan properties in Dubai is similar to that of other types of real estate investment. Particularly for expats, it is vital to understand the rudiments of every stage of the investment process, including all the required documents depending on the location and type of property.

In the case of off-plan properties, it is safe to say that it requires much more than just being knowledgeable about how things work. Because this is an uncompleted property, it requires in-depth research and consideration of many factors. Investors need to ask and answer the following questions: 

– What type of property do I want? 

– Why do I want this property? 

– Where is my preferred location, considering the type of property? 

– How much capital do I need to secure an off-plan property? 

– Can I secure a mortgage for this type of investment? 

– What is the reputation of the developer or investor handling the property? 

– What are the chances that the property will be completed in the scheduled time? 

– Are the risks involved? 

– What is the estimated ROI on this property upon completion? 

There are many more questions. However, by the time you provide answers to all of these, you should be halfway through the process. In the following sections, we shall explore what you need to know and the steps required to secure an off-plan investment in Dubai successfully. 

Deciding on the type of property you want is pivotal to every other decision. Are you interested in getting an apartment or a villa? Do you prefer an office building, and what layout and size do you want? With the choice of property in mind, you can also decide on the preferred location. 

Step 1: What Type of Off-Plan Property do You Want and Why? 

There are waterfront properties, downtown properties, suburban homes, and seaside properties. Some properties are located offshore, mainland and in free zones. Usually, because not everyone can access these properties depending on the location, the prices vary, and so does the prospect. Once you decide on the type of property you are looking for, this will help to see if the proposed finish in terms of colour, furniture, and other interiors matches your preference. 

Step 2. Get an Agent to Help 

Now that you have decided on the type of property you want and why you are investing. The next step is to employ the services of a reputable and RERA-approved real estate agent to assist with the process. Especially if you are entirely new to this, the need to take this step very seriously cannot be overemphasized. Several deals had gone wrong because the investor had no idea what to do and had no legal claim. Especially when the developer failed to meet the proposed deadline. 

Depending on the level of assistance that you need, an agent can help with the following: 

– Legal proceedings 

– Finding the best developers 

– Helping you find the best and most profitable properties that match your needs 

– Getting the necessary documents and assisting where necessary 

With the right agency or agent providing you with the support you need. Securing an off-plan property in Dubai can be very easy. Usually, the agent fee varies, so it is best to discuss the terms before getting started. 

Step 3: Research the developer 

What is the developer’s track record you are looking to invest in their property? What is their completion rate for off-plan properties? How do the quality and overall features of the project upon completion correspond with the proposed plan from the development stage? 

As has been reported, one of investors’ many fears is that of developers not meeting up with construction deadlines or not delivering the proposed quality. In some cases, some of these projects never see the light of the day as they end up being cancelled. 

An investigation into the past projects of these developers will give investors an idea of whether or not they should buy the property. One of the easiest ways to do this is to get in touch with previous and current customers to get direct feedback. With this information, you can decide whether to go ahead with the investment. Meanwhile, your agent can assist with the research to make the entire process seamless. 

Step 4: What is the Financial Requirement for this Investment? 

One of the many reasons off-plan properties are gaining popularity in Dubai is the low investment cost and the flexible payment plan. So, as an investor, it is essential to access your financial status. How much do you have, and how much are you willing to spend? Will you need a mortgage loan from the bank to help finance this investment? 

Irrespective of the source of the finance, the usual practice is that the investor makes an initial deposit between 20-80% of the estimated value. There is no defined approach to this as the agreed amount depends on the agreement between the buyer and the developer. As stated in the SPA (sales and purchase agreement). However, one of the most common payment plans is the 50/50 plan, whereby the investor makes an initial deposit of 50% of the property value into the approved escrow account. The rest of the 50% is spread over the agreed period, and the payment must be completed once the project is completed. 

If you need a mortgage loan, all of these must be discussed in the SPA. Getting a mortgage in Dubai is relatively easy if you know how to do it. Indeed, with support from the agency, it can be a lot easier. 

Step 5: Opening an Account and Making Payment 

Now that you have reached a sales and purchase agreement for your preferred property with the developer. The next step is to open an account to fund the transaction. In line with the requirements of RERA, an escrow account is needed for the payment. That way, the developer cannot access the funds without the necessary permission from the DLD, who must inspect the project and only release the funds at a specific stage of the development. 

Once the account opening is complete, the buyer can make payment via bank transfer, credit card, or any approved means. A copy of the receipt is sent to the developer as proof of initial deposit in line with the requirements stated in the SPA. 

Step 6: Final inspection and handover of the property 

This is the last step in purchasing an off-plan property in Dubai. As a part of the terms in the SPA, it is essential to include a pre-delivery inspection (PDI) date. If the project goes as planned. The PDI date should be a few days (up to 7 days) before the proposed completion and handover date. This arrangement allows the investor to check the property and verify that it matches the 3D designs that formed the basis of the project costing. 

If there is a change or the final project does not match the agreed description, it has to be sorted out amicably, and an agreement reached by both parties. The DLD steps in if both parties fail to resolve the issue independently. 

However, if there are no issues, the buyer proceeds to make the final payment. Afterwards, the developer must sign the accompanying documents indicating the total transfer of ownership to the buyer. It does not end there. There are many other documentation processes required, including a certificate of occupancy. This certificate is needed to show that the property is in line with safety standards and is suitable for habitation. 

Even more, the buyer has 60 days to register this new property with the DLD as part of the legal proceedings for all off-plan property purchases in Dubai. Other things, such as utility connection for power and water, must be done with the designated regulated authority and with the agency’s help; this should be straightforward. 

Risk of Buying Off-Plan Property in Dubai 

There are many talks about the high ROI and enormous benefits of investing in off-plan properties. Unquestionably, this type of investment is gaining much popularity owing to the low entry investment cost compared to buying a fully commissioned property.

Another reason for its popularity is the flexible payment plan, allowing investors to map out their most convenient schedule. However, all of these come at considerable risk. There is that fear of the unknown. Something could go wrong during construction, or the trajected market forecast does not go as planned. 

Indeed, investing in real estate by default has its peculiar risks. However, with off-plan properties, there is a lot more to consider. So, while you think about your next move, below are some possible things that might go wrong if you decide to stick with an off-plan property.

Changes in Market Conditions 

Everywhere in the world, market prices are subject to fluctuations. This risk poses a severe threat to off-plan investments. It is essential to do proper research to know when it is best to make an entry. As a tip, the best entry point is when the market price is very competitive, and prices are relatively lower. That way, when you can get a good ROI when the property is completed. Especially if your motive is to sell or rent the property upon completion. 

Even more, there are many other factors to consider that could affect the prices of off-plan properties after completion. The motive for investing is a crucial factor. Of course, this might not be of concern if you get a villa or apartment for personal use. However, if otherwise, factors such as the property’s location, proximity, and accessibility to other highbrow areas and facilities can be huge. 

Risk of Cancellation or Inability to Meet the Completion Deadline 

Every project has an estimated completion timeline if everything goes as planned. Usually, the developer must include the proposed delivery date in the SPA. However, there have been cases where they failed to meet the deadline. Surely, this is something that every off-plan property investor has to factor in while making such an investment. One way to avoid this is to do thorough research on the developer. As we have mentioned and get more information from previous investors. 

Investigating their success rates and completion accuracy will help guide your decision. Even more, it is crucial to get all the paperwork done per the requirements of the DLD. One of such requirements is that all the payments must be made via an escrow account. That way, the DLD, through its regulatory arm, RERA, can monitor the developers’ progress and release funds accordingly. Undoubtedly, Dubai and the UAE, in its entirety, are always at the forefront of taking proactive measures to ensure that investors get the best. 

However, some of these delays are inevitable. Following a recent decree by Sheik Mohammed bin Rashid Al Maktoum in 2020. A special committee has been put in place to oversee and investigate any cancellation and determine proceedings for settlement rights to the investor depending on the initial agreement. Meanwhile, in the case of cancellation, the committee’s decision to liquidate cancelled real estate projects and settlements is deemed final and unappealable in any court. Hence, you must understand the tenets of the amended Decree No. (33) of 2020 oversees all cancellations and settlements before investing. The best bet, seek legal counsel. 

The Completed Project Does Not Match the Expected Quality 

As expected, it is common practice for developers to offer appealing 3D designs and attractive brochures to show a picture of the property’s appearance upon completion. There is the possibility of deviation between the initial plan and the final outlook of the property upon completion. This is one of the significant challenges accompanying off-plan property investments, as there have been many reported cases of the final property not meeting expectations. 

An excellent way to circumvent this risk is to stick to known developers or investors with a track record of always keeping up with quality deliveries. Indeed, you do not want to risk such an investment with an unknown developer so ensure that you do all the checks and verifications to mitigate this risk. 

No Third-Party Purchase Until an Initial Payment Level Is Reached 

Off-plan properties have the advantage of a low investment entry point and a flexible payment plan. However, if you do not wish to continue or are tired of waiting and looking to sell, there is a clause. You can only do so if you have paid up to a certain percentage in the payment plan. The percentage has to be decided in the agreement, which explains why you should get help when it comes to getting the best deals and documenting all the proceedings. 

Benefits of Buying Off-Plan Properties in Dubai 

With the introduction of freehold properties in Dubai, off-plan properties have become a popular investment choice for expats looking to enjoy low investment payments on properties, a flexible payment plan, and the possibility of high returns on investment upon completion of the property.

Indeed, it is not as simple as it sounds. While this is a high-risk investment, as we have discussed, it comes with many benefits, which explains why it is an increasing choice of investment option for both new and experienced investors. In the following sections, we shall explore why you should consider buying an off-plan property in Dubai. 

Lower Prices and Stretchy Payment Options 

For obvious reasons, this is one of the crucial benefits of investing in off-plan properties. You get the chance to get the lowest possible price at the time and stage of the property while also enjoying a much lower initial deposit. This means you do not need to have all the money to make the purchase. The initial deposit varies from 20% to 80%, depending on the agreement on the SPA. You also get to stretch the rest of the payment in the most convenient way possible. You do not get to enjoy this when buying an already-of terms increasingly popular commissioned property. 

Higher Returns on Investments 

Another significant benefit of buying off-plan properties is the chance of a high ROI when the property is complete. While there is no guarantee of this, factors that can affect the possibility of a high ROI include: 

– The location of the property 

– The type of property 

– The final quality upon completion 

– The state of the economy and government policies at the time of completion 

However, all things being equal, you can expect to enjoy higher capital gains on your investment. 

Higher Rental Yield 

With the ever-increasing influx of people into Dubai, there is an increase in the demand for rental properties, resulting in high rental yield. Of course, there are fluctuations from time to time. However, in the past couple of years, there has been a consistent trend in the increasing rental yields in the entire UAE, as reported by the DLD. Meanwhile, the peculiar and proactive nature of the Emirates Council in terms of economic and political policies that foster best investment practices helps boost confidence and provides a level of financial security. So, if you are buying an off-plan property in Dubai, there is a likelihood that upon completion, the rental fee for properties of thisin a type must have increased, thereby offering a higher rental yield.

Variety of Projects to Choose From 

One of the significant benefits of buying off-plan properties is that it offers investors an array of options. Many recognized developers (Emaar, Dubai Holding, and Damac) in Dubai have off-plan properties scattered across different locations like Business Bay, Dubai Marina, Damac Lagoons, Creek Beach Grove, Lamtara 1, Downtown Dubai, JVC, and many other coveted areas. In addition to location, depending on the stage of the development, the investor also gets the chance to make some modifications if and where possible, allowing for a lot more flexibility. 

Final Thoughts About Buying Off-Plan Properties in Dubai 

Dubai is one of the world’s leading hubs for real estate investments, and one of the many reasons is that buyers can enjoy variety to match their investment needs. The off-plan property market in Dubai is buzzing, with many buyers taking advantage of the low prices and flexible payment plans to tap into the buzz. 

Whether you are a foreigner looking to try this type of investment for the first time or are already familiar with the real estate landscape in the UAE, this information and these steps are crucial. Indeed, while there are many benefits to enjoy, off-plan properties can be very volatile and come with many risks. However, with the right agent to guide you and help you make the best investment decisions, you can enjoy all the numerous benefits of buying an off-plan property. 

Contact me for more details and latest Dubai Off Plan Properties! As a real estate agent in Dubai I always recommend investing in Dubai Off Plan Properties considering all above said requirements.