Off-Plan Projects in Dubai: What You Need to Know Before Investing
Description: Off-Plan Projects in Dubai: What You Need to Know Before Investing. The Development of Off-Plan Projects in Dubai. What does Off-Plan Payment Option mean? Why Should I consider it? What are the possible drawbacks?
In the early 21st century, Dubai was virtually the exclusive preserve of millionaires and billionaires alone. Even to date, the number of vanity plates you find on the streets of Dubai indicates that many people come from money, and they don’t mind flaunting that from royalties to celebrities, crude oil businessmen, and billionaire tycoons.
So, when real estate tourism climaxed in the early 21st century, much of it targeted that upper-class, stinky rich class of individuals. The reason? Because they could afford it! These people could literally afford an apartment on the moon!
Subject to religious/Islamic beliefs, they are likely to be one of the first persons to lodge in Elon Musk’s 5 million dollars per night hotel on the moon (Yes, the media says it is a lie, but aren’t those mind-blowing projects denied until they materialize?).
It is, therefore, no surprise that in its wee days, investors focused on building villas and skyscrapers that had never been built before – there was a huge market waiting to patronize such.
Back then, the focus was on complexes and buildings that were beyond human reasoning, using technology to fashion islands out of deserts and having some of the city’s best resorts and tourism spots. However, as the PR dulled down, investors realized there was also a huge market space for the middle and lower classes.
Considering this, only 35% of the residents in upscale communities like Jumeirah and Al Barsha are millionaires. This means 65% of the people living there have less than a million net worth. You will agree that is quite a high figure for business.
Since the discovery of the power of the middle and lower class and the potentiality of doing real estate that incorporates and considers them, developers started constructing flats in residential complexes in Dubai, which provided more affordable yet decently luxurious properties for most members of the city.
Also, other than the high-rise apartments, builders began considering low-cost but dependable and aesthetically pleasing property choices.
What is most interesting is that, alongside the new affordable housing, came immigrants and foreigners who now began to see the expensive luxurious Dubai as the affordable Dubai coupled with decent job pay and a viable economy. This ushered in a new era of flexible property payment plans.
The Development of Off-Plan Projects in Dubai
According to Emirates.Estate, the quest for affordable housing, and the inclusion of the average income earner in Dubai led to the creation of various flexible payment schemes such as downpayment plans, post-handover payment plans, and off-plan arrangements, among others. This article will focus on the last-mentioned option, the off-plan arrangements.
What does Off-Plan Payment Option mean?
The off-Plan payment scheme is succinctly put – when the developer shows you their plan for a building/complex, detailing what they intend to build, how they intend to build it, the designs and measures taken, and the community layouts.
For example, they may make a brochure and adequate promotion that states the skyscraper plan, how many floors it will have, what units will be on the floors, the size and composition of the units, their positioning, etc.
Such will also contain the amenities and facilities the building is projected to have – gyms, pools, bathrooms, and playgrounds. Furthermore, it will include the expected duration for completion, etc.
You, as an investor/purchaser/intending homeowner, will then look into the project, assess how serious the whole plan is, and partner with them in the project. Partnership, in this sense, means that you will pay a part of the purchase price for a unit or house, which is used to kick off the project, and upon completion, the project is handed over to you.
Some off-plan projects will require you to make installments at intervals until it is complete. There is no one particular way Off-Plans are meant to be; the fragments, payment options, and similar terms are subject to negotiations and agreements.
Why Should I Consider It?
Off-Plan payment is more popular than you can imagine. Research reveals that it is one of Dubai’s most popular payment methods for real estate businessmen. Some people like the flexibility and that you can sell mid-way, while others patronize the option because it is easy and convenient.
You should consider it if you desire peace other than panicking. You should also consider it if you want to conserve capital for other projects. You can use the capital for one house to invest in 2 or 3 houses off-plan and then make payments for them in convenient fractions along with the project progress.
Another major reason people invest off-plan is that the agreements often take a few years, so your property would have naturally appreciated by the time it is complete. Now, the expected range is at least 8 – 10% appreciation.
What are the Possible Drawbacks of Off-Plan Arrangements?
It requires a lot of Trust to pay hundreds of thousands of dirhams for a property you cannot move into immediately. It is even more critical when you haven’t heard the developer’s name. Therefore, one of the drawbacks of off-plan arrangements is the risk of purchasing a property on blind faith.
So, by all means, do your due diligence before agreeing to an off-plan arrangement. You should check if the company is registered and their reputation with abandoned projects; yes, you can reclaim your money, but that’s just extra mental stress, so find out if it is worth it.
The second major drawback under Off-Plan arrangements is that it ties down capital; the money you use as a down payment can be imputed into a turnover business that may deliver more than 10% interest for you.
Business people who like to turn cash in and out find it a gratification too long a delay. Lastly, it does not help urgent moving plans; you must wait for years.