We are off plan Dubai and we will explain what you need to know about buying off plan properties. Of course, purchasing off-plan projects has its own risks. The main advantage is, as a rule, a lower price. Developers usually offer 10 to 30 percent lower prices for unplanned and unfinished facilities. The closer to the end, the higher the price (usually).
Nowadays, developers are attracting buyers with increasingly attractive and flexible payment plans. “Order now with Dh5K” … “Pay only 10 percent and go.” “Pay 50 percent now and 50 percent two years after completion” … “Pay 1 percent per month” … some of the more aggressive advertisements that were recently seen on billboards along the road to Sheikh Zayed or on propertyfinder.ae. And while some of the developer developers still require and receive up to 80 percent in the construction process, the most popular payment plan these days is 50 percent for construction and 50 percent for completion. However, there are risks.
The most common problem with buying a plan is that your project will be postponed. It was suggested that more than 50 percent of projects launched since 2008 in the UAE were transferred at least one year later than quoted. Some significantly more. Some of them were canceled. Unlike the boisterous boom holidays until 2008, schedules of unplanned payments these days should be linked to construction milestones, therefore some of the risk associated with the delay in handover is somewhat mitigated. It’s still not healthy if you rent and plan to move into a new property.
The brochure and display look amazing, but the developer will cut corners and deliver a product that will be less fabulous than expected? Good developers trade their reputation and understand that the quality of the finished product will directly affect their brand and future sales. Others care less.
Being a relatively new market, the boom and downturn in real estate in the UAE has largely depended on the hype and herd mentality, rather than on the fundamental needs of supply and demand. This changes as the market develop to the traditional end-user / long-term investors market. Market risk, however, occurs in all markets around the world, and when you purchase a plan, you risk a general decrease in the value of the property between when you issue a commission for the reservation and receive the keys. On the contrary, the converse is also true. If prices rise, you can use large profits on a relatively small deposit.
Changing Your Financial Conditions
When buying a property from the plan you need to pay 20 to 80 percent during construction, and the rest should be completed. The most common nowadays are payment plans 50/50. If you plan to pay the entire amount in cash, your problems are limited by the aforementioned risk (for this, quite a lot), but if you need a deposit to complete, there is a risk that your financial circumstances may change. You may lose your job; interest rates may increase or banks may change their lending policies. And even if you are eligible for a loan, the bank can not provide you with the funds you need.
To mitigate this risk, for individual developments, you can apply for borrowing up to 50 percent of the purchase price, which is pre-approved at the time of application and is guaranteed to be paid at the end. So no matter what happens to your personal financial situation; if you can, of course, pay 50 percent in cash, you can be assured of obtaining the funds needed to complete the purchase. Please note that not all developers and projects are eligible to participate. Each bank has an approved list of developers/projects. Some of them will offer to fund the plan for individual projects, many will not. Talking to a qualified mortgage consultant before you decide is a very important step.
For the completed properties of Dh5 million, you can apply for borrowing up to 75 percent of the value of the property (80 percent if you are a citizen of the UAE). This means that if you paid 50 percent of cash during construction, you can take 25 to 30 percent of cash. In addition, if the property has increased in value, it may be possible to borrow between 75 and 80 percent of the increased value of real estate and receive even more cash. This will require reapplication of the mortgage and property evaluation, but if the numbers make sense and you want to access cash at low mortgage rates, this is an attractive option.