Complete Guide To Buying Off-Plan Properties In UAE. UAE is famous for its high end and luxury living, especially Dubai. Properties here are on sale in two different variants, i.e. ready properties and off-plan or under-construction properties. Today we will discuss off-plan properties and its features.
Whether you go for ready property or off-plan ones, each one has pros and cons of their own. One significant advantage of buying off-plan or under construction property is their discounted price. A minimum of 10% discount is given on booking, and it can go up to 30% dependent upon the time of booking (closest to completion mean the least discount and vice versa) and type and locality in which the property is situated.
As far as payment plans are concerned, these days many eye-catching schemes are in town. Booking by just paying 10% or 50% now and rest in 2 years after completion of property or pay monthly 1% only are some of the instances where developers try to lure customers into buying their property. However, there are certain risks attached to it, which is outlined below.
Not Living Up To The Commitment.
According to public figures, more than half of the projects launched in 2008 were delayed for more than a year than their scheduled time and even more. This is the most common risk associated with buying an off-plan property, and this got augmented after the dip in the economy in 2008, which engulfed the construction industry as well. Some of the risks might be hedged by linking the completion of construction milestones with a payment plan.
Compromise On Quality
As previously discussed in this document, in almost half of the cases, the deadlines are not met, and in many situations, payments by the buyer are dependent upon completion of crucial construction milestones. So many times, in order to complete the construction, developers forgo many important areas that are important to maintain the quality of the building. As a consequence, you do not get what you bargained for. This happens least when you are doing business with a developer that has a good reputation in the market because for them any delays or compromise in quality means trading on their reputation which they cant afford.
Risk Of Decline In Market Value Of Property
In relative terms, the UAE market is new. Rather than market factors such as supply and demand for property driving the UAE property market, this market is highly influenced by word of mouth or unnecessary hype. When you go to buy off-plan property in UAE because the market risk is too high, there is a risk that real estate value might fall from what you bargained for at the time of booking of the property. This can be turned the other way round, as the market can go both ways benefitting the buyer as well, but the experience after the decline in the economy suggests otherwise.
Deterioration In The Financial Condition Of The Buyer.
Commonly, the payment cycle is 50/50, i.e. 50% payment during the construction process and the rest at completion. In other cases, 20% to 80% during the tenure of development and the rest of it at the date of completion.
There are two scenarios here; one is that you pay these instalments out of ready cash or by taking loans called mortgage. Even if you don’t borrow any money, there is risk associated with buying off-plan properties as mentioned above, but in the case of a mortgage, the risk is even higher because nobody knows what your future financial circumstances will be.
The economic condition may subside. Further, you may get fired from the job, bank’s lending policies might get changed, or there might be an increase in interest rates of borrowing money from banks. All these might put in a situation where you are not able to procure the required amount and resultantly the purchase.
This risk can be mitigated if you plan to borrow only 50% of the total amount of the property and get a pre-approval with a surety that it will be paid at the time of completion of the project. This will help you against any changes in policies imposed by the financial institution. In addition, 50% of the cash payment will ensure that you will not default at the time of completion.
All in all, whether you go for it or not, weighing the pros and cons of the transaction will help you take proper steps to mitigate the risk and to take maximum advantage of the benefits involved.