Ask the Agent - What are the advantages of buying a property under construction?

Ask the Agent - What are the advantages of buying a property under construction?Pooja Mihir Shah

- I want to purchase a property that gives me a fixed return. What type of investment is suitable for me?

We have found several foreign investors who are interested in purchasing in the UAE. Given the volatile economy worldwide, one wants to secure capital first then procure an annual rental yield. Thus come serviced apartments. They perform a dual role where they bridge the gap in short-term rental properties, at the same time guarantees an annual return of 7-8%. The developer offers a fixed rental guarantee option providing owners with better returns and income guarantee.

The advantages of investing in serviced apartments are: 90% occupancy, quality corporate tenants, weekly free inspection and maintenance, no marketing or advertising fees, and lower maintenance and repair costs.

Options available are usually between a studio and one-bedroom; thus, the investment does exceed Dh1.5 million.

- What are the advantages of buying a property under construction?

With the available inventory of homes in today's market, you might want to take a look at new construction, which is new property.

The most obvious advantage to buying a new construction home is that everything, from the roof and windows to the appliances and systems, is new. Many items often come with warranties. That means low repair costs in the first few years.

Operating costs are also lower with newer homes since they are likely to be energy efficient. This can save you money in the long run.

Another pro is that if you purchase a new construction property early during the pre-construction phase, you might be able to customize many features such as paint colors and appliances to suit your personal taste.

The best part is a developer may lower the asking price or even throw in some free upgrades and amenities. And don't be surprised if the developer offers you financing options for a mortgage.

- The disadvantages of buying new construction homes?

You can't assume that a new construction home is in perfect condition. You should still get the property inspected by a professional prior to purchase to ensure everything is in good working order.

The second disadvantage: location. Developers usually start communities where there's open land. If you buy into a new development, you'll likely find yourself far from the city center. This could make your commute to activities or work longer and more expensive.

Another con is if the home is in a new project development. You won't know what the character of the neighborhood will be as opposed to an established area that already has a ''personality.''

Yet another downfall is that you may need to spend more money on exterior projects. Finally, since we can't control everything, a home buyer needs to be prepared for delays.

- I live in a new villa community that does not have a CCTV system. Should I get it personally for my home, or is it the responsibility of the master developer?

The UAE is one of the safest countries in the world, but one can never be too sure.

Most building communities have wired security systems although the same does not hold true for all gated villa communities.

Since CCTV cameras are now gaining in popularity and becoming more affordable, homeowners can feel more comfortable knowing they can secure their home, home businesses and other personal properties.

Homeowners who travel very often must have their property secured for safety.

Installing CCTV cameras is not the responsibility of the master developer, but the owners association can appoint a reliable community patrol. But if it takes longer than anticipated, I would advise on getting it done personally.

- Question of the Week: I own a property in a building development and have been appointed one free parking space, but I need one more. Should I invest in purchasing one more spot?

Parking spots are becoming harder and harder to find with one-bedroom units. Many two-bedroom units are now selling with only one parking spot where normally you have one family who has at least two drivers, if not more.

The whole process is driven by buyer demand but also economics as developers are being squeezed into smaller and smaller development sites, and the cost of building the parking garages has skyrocketed.

Some parking spots in new buildings are charging high maintenance fees, on top of the purchase price.

My advice would be to do the math carefully before buying a spot in any new or resale apartment. This reinforces my theory that the pendulum has swung too far, too fast and developers are not building enough parking spots today to meet the demand of tomorrow.

So, for any unit with a projected value of over Dh2.5 million, I do recommend buying a parking spot whenever possible, assuming the cost to purchase is at or below future market value.

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Source: Pooja Mihir Shah, Special to Freehold

The writer is Director - Green House Real Estate

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