The UAE’s real estate market is one of the world’s largest, and it is well-known for offering profitable investment options. Buyers can invest in a wide range of homes, from ready-to-move houses to off-plan constructions. Off-plan properties, on the other hand, have grown in appeal among both purchasers and investors. The increased interest in off-plan property is mostly due to the ease of payment and profitability following project completion.
Let’s take a deeper look at the methods, steps, and other considerations involved in buying off-plan property in the UAE.
WHAT EXACTLY IS AN OFF-PLAN PROPERTY?
Off-plan property is defined as any property got straight from the developer while it is still under construction. The property might be brand new or in the early phases of building. Having said that, buyers of off-plan homes must rely on the blueprint or floorplan given by the developer.
In most cases, buyers must pay a percentage of the entire property value as a down payment. The remainder of the payment, on the other hand, might be made in installments or as mutually agreed upon by the parties.
HOW TO BUY AN OFF-PLAN PROPERTY
Here are all of the steps that investors must take before buying off-plan property in the UAE.
DRAW UP A BUDGET
The first step in buying an off-plan property in Dubai or the other Emirates is to create a budget. To make things easier, separate the costs of buying an off-plan property into three categories: down payment, instalments, and legal fees.
Before signing the sales and purchase agreement, the down payment is made. The down payment might range from 10% to 20% of the total buying price. Remember that banks will not issue a mortgage for the down payment, so purchasers must save the money themselves.
The following monetary cost is in the form of installments and legal expenses. However, if your monthly income is sufficient to cover your household expenses and instalments, you can choose the off-plan project.
CONSULT WITH A REAL ESTATE AGENT
The next step in buying an off-the-plan property is to speak with a real estate agent. Hiring a real estate agent has various advantages since they have the experience, knowledge, and skills to help you through the process.
A real estate agent can provide you vital information about the project and anticipate the market worth of the property when it is completed. Furthermore, their connections with developers can help them negotiate the final price and number of installments.
EXTRACT ALL PROJECT DETAILS
Buying an off-plan property is a long-term commitment, and buyers rely solely on the floor plan before making a decision. That being stated, it is critical to identify and validate all relevant project elements. This should include the developer’s market reputation, previous projects and their completion dates, court cases, and land lease. A complete verification will save you time and trouble in the future.
SELECT A PAYMENT PLAN
The payment plan must be finalized as the final step in this procedure. The developer provides the investor with a variety of payment schemes. The payment schedule varies based on the amount to be paid after the down payment.
Choose the plan that best fits your budget. Before signing the contract, double-check the interest rate, completion date, and any hidden costs.
COMPLETE THE LEGALITIES
Buyers must take the following legal actions after closing the contract with the developer.
1. GET YOUR RESERVATION FORM
The reservation form is the first formal step after confirming the purchase of an off-plan home. It is a legal document that comprises the purchasers’ personal information, the kind of property, the payment plan, and the amount of downpayment. Prior to proceeding to the next step, both pirates must sign the form.
2. SIGN A SALES AND PURCHASE AGREEMENT (SPA).
One of the most important procedures in buying an off-plan home in the UAE is signing an SPA. The SPA agreement specifies the property valuation, property unit layout, handover date, and payment schedule.
Because the signed document serves as a written agreement between both parties, it should be carefully read. Check for any hidden fees or terms that are not in your favor.
Furthermore, confirm the developer’s name, personal information, and all property details. Remember that the agreement must be registered with government bodies such as TAMM in Abu Dhabi or DLD in Dubai.
3. DEPOSIT MONEY IN ESCROW ACCOUNT
After signing the agreement, the down money must be transferred to the developer. Developers are obligated to supply you with an escrow account into which the funds will be placed for this reason.
To verify the legality of an escrow account, go to the official website of your Emirate’s government institute. For example, Dubai residents can visit the DLD to verify the escrow account.
Transfer the funds to the escrow account once the account has been validated. You have the option of paying by wire transfer or credit card.
4. PAY THE BROKERAGE COMMISSION
If you hired a real estate agent, you must pay a brokerage commission after transferring cash. The commission amount is vary and is typically determined by the entire property value.
5. PROPERTY HANDOVER
Buyers are advised to come and examine the completed home seven days before the handover date. Buyers can witness during the inspection whether or not the final property fits what the developer promised. Buyers must also inspect the finishing, paint, interiors, and consumption materials. In the event of a disagreement, purchasers can request that the developer replace the piece.
DOCUMENTS REQUIRED FOR OFF-PLAN PROPERTY PURCHASE
The documentation necessary to buy off-plan property in the UAE are listed below.
- Emirates ID (Copy)
- Passport (Copy)
- Sales and Purchase Agreement (SPA)
- Reservation form
- Mortgage contract (If applicable)
Remember that the above-mentioned documents are generalized, and the buyer’s Emirate may or may not request additional paperwork.
CONSIDERING BEFORE INVESTING IN AN OFF-PLAN PROPERTY
Because of the investment return and profit margin, off-plan property is quite popular. However, before buyers commit to any project, here are some questions to ask when buying off-plan property in the UAE.
1. CHOOSE A REPUTABLE DEVELOPER
Buying an off-plan property is a long-term commitment because the buyer must pay the balance in instalments. As a result, before investing in an off-plan property, research the developer’s market reputation. The first step is to only invest in registered projects built by licensed developers.
Buyers can examine the developer’s credentials by visiting the official website of the relevant authorities. Dubai residents may validate the developer via RERA or DLD, and a Dubai Rest App is accessible for digital verification. Similarly, if the project is located in Abu Dhabi, it must be registered with TAMM.
2. EVALUATE THE PROJECT
It is advised that after selecting a project for investment, you personally visit the property site. A personal visit to the property will aid in understanding the space and layout of the property unit. Buyers may also verify the project’s development and the quality of materials utilized in building.
3. DETERMINE THE ROI
When investing in an off-plan project, the most important factor to consider is ROI. The ROI is determined by a variety of criteria such as location, property type, developer repute, and rental potential of the unit. As a result, before finalizing the property, these issues must be considered.
4. PRIORITIZE LOCATION OVER FINANCE
When looking for an off-plan property, one of the most important factors to consider is location. It is advised to prioritize location above property cost. Off-plan projects in prime locations are expensive, but they often provide a better ROI, which is useful in the long term.
Projects near the seashore or in freshly developing regions are often seen as desirable. If you choose a project in a developed location, check sure public transit, such as metro or bus stations, is close.
5. DISCUSS PAYMENT PLAN
Developers provide a variety of payment schemes to make it easier for investors. Each strategy has advantages and disadvantages that should be evaluated before selecting one. Negotiate the payment plan’s terms and instalments based on the purchasers’ convenience and budget. Remember that failing to make timely payments can result in default, and in some situations, investors must pay a penalty for late payments.
6. CAREFULLY READ THE CONTRACT
When you have completed all of the aforementioned steps, it is time to sign the SPA with the developer. Make sure to thoroughly read the agreement before signing it. Look for any unspoken terms and restrictions. In addition, check for an asterisk () sign to detect any hidden conditions contained in the contract.
This was the entire list of things to consider about when buying an off-plan property in the UAE.
HOW TO MANAGE PROPERTY HANDOVER DELAYS
Delayed handover of off-plan property is a regular problem for investors. The delay might be caused by a variety of factors such as market conditions, international crises, construction issues, and so on.
Regardless of the situation, the developers are required to deliver the property on the agreed-upon date. Let’s read on to learn how to deal with delayed off-plan property handovers in the UAE.
1. NEGOTIATE WITH THE DEVELOPER
If the property handover continues to be delayed, the first step is to negotiate with the developer. Negotiate with the developer to find a solution that benefits both parties.
In addition, read the SPA since it should include a paragraph outlining the remedy to delayed property transfer. Buyers can make a refund claim if the developer is unable to meet the given provision.
2. VERIFY IF THE PROJECT HAS BEEN CANCELLED BY THE GOVERNMENT.
Check to see if the property has been cancelled by the government before submitting a claim. Every Emirate’s relevant authorities have the authority to cancel off-plan projects for a variety of reasons. The authorities also provide information on the return process in the event that the project is canceled by the government. Another benefit of choosing to invest in off-plan property in Dubai and other Emirates is the safe transaction and possibility to collect paid funds.
3. FILE A CLAIM
Buyers can pursue a reimbursement claim if the property is not cancelled by the government. However, ensure that the grace period for the delayed property handover granted to the dealer has expired. Filing a case before the grace period is pointless. To prevent any complications, it is best to get expert guidance when making a refund claim.
FAQS
IN THE UAE, HOW CAN I BUY AN OFF-PLAN PROPERTY?
To buy an off-plan home in the UAE, buyers must first create a budget and choose a location in which they want to buy an off-plan project. When buyers have decided on an area, they should hire a real estate agent, look for a project by a reputable builder, select a payment plan, and finalize the legalities.
DO BANKS OFFER LOANS TO PURCHASE AN OFF-PLAN PROPERTY?
Yes, banks do offer mortgages for the purchase of off-the-plan properties. The mortgage, however, is not available for down payments, and the investor must have paid at least 50% of the entire purchase price.
ARE OFF-PLAN PROJECTS MORE EXPENSIVE THAN READY-MADE ONES?
No, off-plan properties are typically less expensive than ready projects. Having said that, buyers can save significantly when they choose off-plan homes versus ready projects.
WHAT IF I AM UNABLE TO PAY THE OFF-PLAN PROPERTY INSTALMENTS?
If you fail to pay your installments on time, the developer may levy fines. However, if payment is delayed for an extended period of time, the contract becomes null and void, allowing developers to sell the property to another buyer. The defaulter will get the paid money from the developer after the specified time period.
CAN I SELL MY OFF-PLAN HOME BEFORE IT IS COMPLETED?
Yes, you may sell your off-the-plan home before it is finished. However, read your contract carefully because some developers will not let you resell the property until an agreed-upon amount is paid.
This brings us to the end of our guide on purchasing an off-plan house in the UAE. Off-plan houses are considered an excellent investment if you have a restricted budget or funds to spend for down payments. Aside from convenient payment plans, off-plan projects provide numerous other advantages, including a higher ROI. If you want to take advantage of these advantages, go through these properties for sale in the UAE to locate a suitable off-plan project for investment.
