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If you’ve started to look into buying property in the UAE, you will likely have come across plenty of off-plan properties. You might have seen gorgeous 3D renders of charming villas at extremely enticing prices and payment plans, but what is the catch?
In this article, we’ll dive into the benefits and potential risks of buying off-plan properties and why off-plan properties can make for an excellent real estate investment.
First off, what does off-plan mean in real estate?
Off-plan refers to buying a property before its construction is complete, typically when only the architectural plans or initial phases are available.
Buying off-plan is particularly popular among real estate investors because it often allows for a lower entry price, and then the property will usually increase in value significantly upon completion, thus maximising returns for the investor.
In the UAE, many investors choose to buy off-plan properties to secure a property in an up-and-coming location and potentially benefit from future market appreciation. However, it’s important to assess the developer’s reputation and market conditions before committing to an off-plan investment.
Before we jump to the benefits, let’s answer this question; what is the difference between off-plan and ready property? We’ve compared them below:
| Off-plan property | Ready property (on-plan property) |
| Still under construction or in the pre-construction phase. | Completed and available for immediate occupancy. |
| Often available at lower prices. | Generally higher prices compared to off-plan properties. |
| Potential for customization. | You can see exactly what you are buying. |
| Investment risk due to project delays or changes. | Immediate availability. |
Discover Off-Plan Properties for Sale in the UAE
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Nad Al Sheba Gardens Phase 5
Dubai, Nad Al Sheba, Nad Al Sheba 1, Nad Al Sheba Gardens - Phase 5
3, 4, 5, 6 and 7 bedrooms
From: AED 4,180,000 Down payment: 20%
Bay Grove
Dubai, Deira, Dubai Islands, Bay Grove Residences
1, 2, 3 and 4 bedrooms
From: AED 1,850,000 Down payment: 20%
Rome by Samana
Dubai, Mohammed Bin Rashid City, Rome by Samana
1, 2 and 3 bedrooms
Down payment: 10%
The Alba Furnished Residences
Dubai, Palm Jumeirah, THE Alba Residences by Omniyat
2 and 3 bedrooms
From: AED 21,000,000
Beach Walk Grand
Dubai, Deira, Dubai Islands, Beach Walk Grand
1 and 2 bedrooms
From: AED 2,100,000 Down payment: 20%
Marina Cove
Dubai, Dubai Marina, Marina Cove
1, 2, 3 and 4 bedrooms
From: AED 2,030,000 Down payment: 10%
Marina Place
Dubai, Mina Rashid, Marina Place
1, 2 and 3 bedrooms
Greenville
Dubai, Dubai South (Dubai World Central), EMAAR South
3 and 4 bedrooms
From: AED 3,200,000 Down payment: 10%
Knightsbridge
Dubai, Meydan, Knightsbridge
4, 5 and 6 bedrooms
From: AED 7,900,000
Highgrove
Dubai, Mohammed Bin Rashid City, The Highgrove by Ellington
1, 2 and 3 bedrooms
From: AED 1,550,000 Down payment: 20%
The Benefits
Why Invest in Off-Plan Properties?
There are several advantages to investing in off-plan properties. First off, off-plan properties usually have lower prices compared to fully constructed homes.
Moreover, you can take advantage of the flexible payment plans offered with most off-plan units, which will allow you to spread the cost over several months or years.
This not only makes off-plan investments more accessible for first-time buyers but also highly attractive to seasoned investors looking to maximize their returns.
Below, we’ll dive deep into each of the benefits of investing in off-plan.
1. Lower Prices & Flexible Payment Plans
Not only is buying off-plan properties cheaper, but many developers also offer attractive payment plans. Moreover, developers often offer discounts on off-plan properties, from 10% to 30% reduced prices.
Additionally, many developers have payment plans where you only pay 50% of the unit’s price during construction and 50% at completion.
Off-plan properties’ reduced prices and flexible payment plans make them significantly more affordable than ready properties.
These discounts also make off-plan properties a great investment option because the unit’s value usually rises closer to delivery. Thus you can leverage the deals, buying at a lower price, and then sell closer to delivery with a significant profit.
2. High Capital Gains
Recent real estate trends in the UAE show that the real estate sector remains strong and places the UAE as an excellent location to invest in property. Moreover, your ROI can be even more alluring within the off-plan market.
For example, suppose you buy an off-plan property in an underdeveloped area that shows promise of developing into an attractive community. In that case, you can expect your property’s value to increase significantly.
3. High Rental Yield
The rental yields in the UAE are high, and with so many expats coming in, there’s always a demand for housing.
It doesn’t matter whether you prefer buying off-plan or ready properties – either way, you can expect an excellent rental income from your investment.
This will give you a solid financial foundation and peace of mind knowing that your investment is working hard for you.
4. Property Regulations in Dubai
A common concern with buying off plan is worries of project delays or fraud. Fortunately, the Dubai Land Department (DLD) has implemented several stringent regulations to safeguard buyers of off-plan properties against delays, cancellations, and fraud.
Meanwhile, the Dubai Real Estate Regulatory Agency (RERA), a DLD subsidiary, oversees the implementation of these regulations. RERA enforces penalties on developers who fail to meet their obligations.
Here’s just one example of how the DLD protects the interests of investors:
The DLD closely monitors project progress, ensuring adherence to approved schedules and milestones. In fact, as a buyer, you can track the progress of a project through the DLD’s official website, namely the ‘Project Tracking’ service.
This is crucial, given that the payment schedule relies on the project’s progress.
If the DLD does not confirm that the project has reached a specific completion percentage as agreed upon in the payment schedule, the buyer is not obligated to make the payment. Thus, protecting buyers from off-plan project delays.
5. A Wide Variety of Off-Plan Projects
With innumerable new off-plan developments in the works, you will be spoilt for choice regarding both developers and locations. From MBR City villas to Business Bay apartments, you can choose from a wide range of units and designs.
Off-plan vs Secondary which to buy? Click here to know all about this
The Risks
1. Project Delays
The most common issue with buying an off-plan property is that your project could be delayed. It has been suggested that more than 50% of projects launched since 2008 in the UAE have been handed over at least one year later than quoted.
However, unlike the heady boom days of pre-2008, most off-plan payment schedules these days are linked to construction milestones.
This mitigates the risk of delayed handovers, yet it is still something to factor in, especially if you’re renting and planning to move into your new property on a specific date.
2. Quality Risk
The brochure and display suite might look impressive but will the developer cut corners and deliver a product less fabulous than expected?
Good developers trade on their reputation and understand that the quality of their finished product will directly impact their brand and future sales. That is why they are incredibly diligent about delivering units that meet world-class standards.
However, this is only the case for some developers. The best way around this is to buy from reputable developers with a stellar track record for delivering high-quality developments.
You can even ask your real estate agent to show you around recent properties delivered by a developer before you decide.
3. Market Risk
As a relatively new market, UAE’s real estate boom and bust cycles have been primarily driven by hype and a herd mentality instead of supply and demand fundamentals.
This is changing as the market matures into a traditional end-user and long-term investor-dominated market.
However, market risk occurs in all markets across the world. When buying an off-plan property you risk a general decline in real estate values between when you hand over your booking fee and when you receive the keys.
Conversely, the opposite is also true. If prices increase, you can leverage significant gains on a relatively small deposit.
4. Change of Your Financial Circumstances
To buy a property off-plan, you must pay from 20% to 80% of the purchase price during construction and the rest once the property is completed.
If you require a mortgage to complete the purchase, you must consider that your financial circumstances may change. Losing your job, increased interest rates or changes in bank lending policies may impact your ability to get a mortgage in the future.
Essentially, though you may qualify for a loan now, you may find yourself in a position later where the bank will not lend you the funds to complete your purchase.
However, this risk can be mitigated.
For selected developments, you can apply to borrow up to 50% of the purchase price which is pre-approved at the time of application and is guaranteed to be paid at completion. To be eligible for this, you must pay 50% of the purchase price in cash.
This means that if you can pay 50% in cash, you are guaranteed to get the funds you need to complete the purchase, regardless of any changes to your personal finances.
Please note that not all developers and projects are eligible. Additionally, every bank has its own approved developer and project list, and not all banks offer finance for off-plan projects.
We recommend talking to a qualified mortgage advisor before you put down your booking fee to understand all your options.
5. Re-selling Restrictions
One of the downsides of buying an off-plan property is there might be some restrictions to selling the unit. In many cases, you need to pay a set percentage of the off-plan unit’s price to the developer before you can sell it.
That is why it is critical to check the minimum payment before you can sell with the developer. This is especially important if you are buying an off-plan property intending to sell it immediately for profit.
6. Can’t Rent it Out Immediately
One of the cons of investing in an off-plan property is that you will have to wait until the project’s completion to rent it out. Whereas, if you purchase a ready property, you can start seeing profits from rental returns immediately.
That isn’t to say you must wait too long to start seeing a return on your investment! Many investors benefit from the discounted prices of off-plan units and opt to sell the unit before its completion for a significant profit.
Costs of Buying an Off-Plan Property
Similar to buying a ready property, you will need to pay the following fees to the Dubai Land Department when buying an off-plan property,
- Property Registration Fee: 4% of property value
- Oqood Registration: AED 3000
Top Tip:
Some developers will offer to pay part or all of the DLD registration fee to entice buyers, leading to a 4% saving.
Where to Find Off-plan Properties
We have a dedicated New Projects page where you can browse hundreds of off-plan developments across the UAE, including Dubai, Abu Dhabi, Sharjah, and more.
You can easily sort the developments by price or delivery date to find units that best fit your timeline.
FAQs
1. What Happens if You Can’t Pay Off Your Off-Plan Property Installments in Dubai?
If you cannot meet the payments for your off-plan property in Dubai, it is crucial to understand the potential implications and the possibility of getting a refund.
In such situations, the specific terms and conditions outlined in your Sales Purchase Agreement (SPA) will determine the refund amount, if any.
Generally, developers may have the right to retain a portion of the funds already paid, including the initial deposit and any instalments made, as per the SPA.
The exact refund percentage can vary depending on factors. These include the stage of construction, developer policies, and any applicable penalties or deductions specified in the contract.
We advise that you carefully review your SPA and seek legal advice. Additionally, you can communicate with the developer to better understand the refund provisions and explore potential alternatives that may be available to you.
2. Can I Sell My Mortgaged Off-plan Property in Dubai?
You can definitely re-sell your off-plan property in the UAE; however, there is a caveat. Many developers will not allow the re-sale of an off-plan property until a certain percentage of its value has been paid off.
This percentage can be around 30 to 40% of the unit’s value, but it can differ between developers. Thus, check with the developer what their policies around re-selling are.
After you’ve paid the minimum amount, the process is quite similar to selling a ready property.
3. Can I Get a Mortgage to Buy Off-Plan Properties?
Yes, you can take out a mortgage to buy an off-plan property.
Although, you should note that the maximum loan-to-value ratio for mortgages for off-plan properties is 50%. Additionally, some banks have particular requirements regarding the types of properties and projects that can be eligible for mortgages.
On the other hand, there is a downside to taking out a mortgage for off-plan properties. You may not be eligible for the payment plans and discounts offered by developers if you are mortgaging the unit.
This can differ between developers, so it’s best to check with individual developers.
Buying off-plan properties in the UAE has both pros and cons. Overall though, with careful consideration, buying a house off-plan can be a rewarding investment opportunity.
If you’re ready to take the plunge, browse hundreds of off-plan properties in Abu Dhabi, Dubai, Sharjah and beyond in New Projects on Property Finder.
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