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Do you think there is more real estate supply than demand? Are people still buying?
With the launch of new projects every week, a point of concern among buyers has been if there is more demand or supply in the market. According to statistics, the current Dubai population is 2.5 million which is expected to rise to 3.7 million by 2020, an inflow of 1.2 million. There will be 68,644 units that will be handed over by 2020, not enough to cater to the requirement of 1.2 million. This makes it clear that any concerns over supply are unfounded. There are good payment plans offered by developers and good finance options provided by banks, making buying more attractive. Due to lower prices and attractive interest rates, finance buyers have emerged as the dominant buying force in the market. Given the trajectory of the population and new job creation, oversupply will not be an issue.
What are the advantages of buying an off-plan property?
These are the reasons why off-plan investments are attractive: 1) Minimized risk – If the developer offers a payment schedule, any type of potential risk is borne by them. In such cases, the need to complete the project is a must for the developer; 2) Increased ROI – By the time construction is finished, prices have generally risen due to market dynamics. The investor can sell the property to another purchaser and earn excellent returns; 3)Fixed price – Locking a property at today’s price by paying a small down payment allows you to enjoy the appreciation of the property’s total value. In short, together with the affordable payment plans and high ROIs, off-plan properties are considered an extremely lucrative investment. Its associated risk has been completely mitigated due to the stringent laws and regulations set by the Dubai government to protect the interests of the investors.
In addition to the cost of property, what other costs do I need to consider?
Most property buyers think it is only the property cost and broker commission that they have to pay. All other costs come as a shock to them. During the buying process, both the buyer and the seller need to take care of fees and charges.
The buyer must pay the security deposit as per the sale agreement (10 per cent of the property value), transfer fee to the Dubai Land Department (4 per cent of the property value), connection fee to the Dubai Electricity and Water Authority (DEWA), community service fee or maintenance fee, mortgage application fee (if the property is being bought on mortgage), admin fees to the Dubai Land Department and broker commission.
Meanwhile, the seller needs to consider paying for the following: developer NOC fee, clearing service charge/maintenance fee, mortgage clearing fee (if the property was mortgaged), DEWA/district cooling charges and broker commission.
How is the off-plan property business safeguarded by the government?
Prior to the promotion or sale of an off-plan project, the developer must firmly comply with the strict set of rules set by the Dubai Land Department (DLD) that include, but are not limited to, the following: Developers and projects must be registered with the DLD and the Real Estate Regulatory Agency (RERA). Construction progress on the site must reach at least 20 per cent in completion, or the developer can choose to place a security deposit with DLD worth 20 per cent of the project’s total value. Developers have to purchase the land that they will develop, and any payment received from sales must go directly to an escrow account. The account is monitored by RERA and can only be accessed by the developer as construction milestones are reached. In the event where the project is not delivered, the escrow agent of the project must take the required measures to preserve the rights of depositors and ensure the project is completed, otherwise depositors are refunded.
Question of the Week
For a new buyer in Dubai, what are the preparations that he should make before looking out for a property?
There are a few prerequisites that you should be ready with to make your search easy and the transaction go smooth and hassle-free.
• Be clear on what your buying intension is: Before you start looking for a property, decide if you are looking for an investment or for personal use as this will help you narrow down your search in particular areas or particular unit types.
• Get your finances in order: You should be well aware if the property will be bought in cash or mortgaged. If you are looking to buy the property in cash, you should decide the maximum amount that you will put in to buy the property. If you are a mortgage buyer, you should meet with your banker to understand the procedure and your eligibility. After getting an approval from the bank, be ready with the 25 per cent and associated costs of the property price.
• Be realistic with your requirements: Three factors usually determine a buyer’s decision on what property to buy – budget, size and location. Often, you will have to compromise on one of these in order to find the property that fits your needs best. For instance, if you want a large property in a key location, you will need an increased budget. If your budget is limited but you are fixed on your location, you may have to compromise on the size, and so on and so forth.
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Source: Deepak Sharma, Special to Freehold
Property Consultant, Candour Real Estate