Every once in a while, I get asked the question: “what are the positives and negatives of buying an off-plan property? What is the risk to reward ratio? ”
I will give you my perspective on the subject.
Before we get into it, I will tell you a little more about myself to legitimize my view. I have been in Dubai’s real estate scene since 2008. I have seen the market cycle from boom to bust and back to boom again. I have bought and sold over 50 off-plan properties for myself. I still hold a few and many are completed and handed over to me now. I have handled more than 400 off-plan transactions for my clients and as a company, we have handled more than 2000.
Advantages of Off Plan Property
- Discounted Price: Most of the properties sold as off-plan are under priced compared to the ready property market. In some cases, as much as 30%.
- Payment Plan: As Dubai grows and market competition stiffens, developers are constantly competing amongst themselves offering better payment plans to attract the buyers. Some only collect 10-20% during construction and the rest on the hand-over and some go even further with interest-free payment plans after the property hand-over. This is something really amazing and never seen before in Dubai.
- Large Selection: Buyers can pick and choose the size, floor, view, layout, location, etc. Furthermore, Off-plan units are equipped with all new home technology, gadgets and appliances. Buying in the ready property market has very limited options. You have to buy whatever is available for sale and most of the time, there aren’t many.
- No Fees: There are no additional fees to the buyers. You only pay the purchase price and that’s it. You avoid paying 4% to Dubai Land Department, 2% or more to the real estate agent, NOC fees, Trustee fees, etc. The developers pay all the fees.
Disadvantages of Off Plan Property
- Construction Delays: This has been the killer lately. A lot of developers are delaying hand-overs and they have protected themselves with technical clauses in the sales and purchase agreements, and nobody reads those! So basically nothing can be done legally and they are in the safe and you are not!
- Loss of Income: while the property is under the construction, it will not produce an income through renting. The longer the delay, the more you lose.
- Quality of Finishing: Some developers do not deliver the same quality as promised as per their catalogs or show homes.
- Hard to Sell: Re-selling an off-plan property in the secondary market is quite challenging. You must assess your financial position before making a purchase. Buyers of off-plan properties rather purchase directly from the developer for the wider selection and also to avoid the additional fees as mentioned above in the advantages.
The most important decision while buying an off-plan property is choosing the right project. Dubai is growing with many developments and choosing one could be quite challenging. We have assisted our clientele to successfully do so with our extensive experience and knowledge. We are here to help and our help is free of charge!