Study before striding into off-plan purchase

There is always an added risk when buying off-plan property. However, it always provides higher capital appreciationDhiren Gupta, Managing Director, 4C Mortgage Consultancy

No doubt, off-plan purchases are a worthy alternative in today’s market, with eye-catching payment plans and resilient security measures taken by the government to protect buyers’ rights.

Off-plan developments have become more accessible at lesser values. Almost every developer is offering a lucrative payment plan. Some even offer post-handover installment plans to entice those who have a restrictive budget to get into the property market.

Investing in a home which survives only on a piece of paper seems risky. Hence, proper due diligence should be considered.


Buying an off-plan unit requires a tactical approach. The buyer must conduct research to ensure the numbers work. One should look into finance options, return on investment, potential investment growth over a certain period and depreciation. Moreover, there is a range of other objectives like location, community, surroundings, payment plan and developer record.


Location is an important aspect to consider when investing in property. Look for landmarks, public transportation options, schools, hospitals, supermarkets, pharmacies, shopping malls and petrol stations.

Payment plan

When buying off-plan, everything revolves around the best payment plan and value for money – what buyers are getting when investing in a project. Compute some costs and make comparisons on the resale value and capital appreciation. Payment plans have a knock-on effect on sale prices; therefore, make sure you meet your overall objective in line with your personal liquidity estimate.

Capital gain in Dubai is higher than any other cities across the world. If you buy off-plan in today’s price, the property will be worth more than you paid with market growth.

Developer credentials

Another crucial factor to weigh before finalising a deal is to study the quality of the developer’s projects, standards and track record. The developer may be big or small, but what matters is how well the project is constructed. If you are buying for the first time, spend on a project that gives you confidence.


If you are planning to finance the purchase, understand mortgage and the different mortgage options for that particular project. In Dubai, only a few banks finance off-plan projects. And as per the Central Bank guidelines, the maximum loan to value for off-plan mortgages is 50 per cent regardless of purpose, value or category of the purchaser. If the project is listed with the bank, the funding process is possible during construction stage; otherwise, one can only obtain mortgage at handover stage.

To elude potential risks, the lender performs stringent due diligence and sanctions mortgage approval for listed developers. Besides, once the preliminary 50 per cent is covered by the purchaser and the developer achieves the defined construction milestones, the bank funds the balance amount. To understand the buyer’s eligibility, the lender reviews his income and property documents, and carries out strict affordability and stress tests to make sure he can pay the loan.

One must note that once the amount is disbursed from the lender to the developer’s escrow account, the lender charges an interest or profit on that amount, which is a bit higher during the construction period; it is adjusted to a variable rate after project completion.

There is always an added risk when buying off-plan property.

However, it always provides higher capital appreciation.

Source: Freehold


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