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- How safe is it to buy off-plan properties from private developers as I have noticed that they are much cheaper than other branded and government-backed developers?
Since the recovery of the real estate market, we have seen an increased number of off-plan launches from both branded and non-branded developers. The major difference or risk is the credibility of the developer.
As per the new law, no developer can launch a project without completing the plot payment, finishing at least 30% of construction or depositing an equivalent amount in the escrow account. All payments from the investors will be put into an escrow account and the developer must register the unit with the Land Department. As a buyer, you must ask the developer to present the approved floor plan, escrow account and oqood documents before making any payment to minimize risks.
- Keeping in mind Expo 2020-related infrastructure developments, which areas do you recommend one can buy off-plan properties? Is it advisable to buy in these areas from now even if the Expo is still six years away?
Expo 2020 and its related infrastructure projects will directly influence some of the major developments in Dubai. Maktoum International Airport will also play an important role in the demand for real estate in certain areas.
Jumeirah Village has emerged as the center of New Dubai and there is a lot of potential in this location mainly because it lies at the center of three main roads: Shaikh Zayed Road, Al Khail Road and Shaikh Mohammed bin Zayed Road, and it is located directly opposite Emirates Living. Prices are still very reasonable, but there is a possibility for prices to rise in this area.
Al Furjan is also one of the locations that will benefit from the new airport and Expo 2020. Remraam, Dubai Sports City and IMPZ are also some of the developments to look forward to.
- Is it legal for a developer to ask for payments before reaching a certain milestone or commencing construction? If I default on my due payments, what are my options?
The law is very clear with regard to payments and milestone achievements. Developers now ask for payments vis-à-vis milestones. They cannot launch a project without full payment of the plot and have finished 30% of construction. They have the right to ask for 30% to 40% payment provided their project is in compliance with the law. Regarding future payments, a developer cannot ask for payments until it reaches a certain milestone; otherwise, contact RERA. If you do not pay any due amount, the developer has the right to penalize you. If after 60 days you do not pay the installment, they will send you a legal notice through RERA and give you 30 days to clear your dues. If not, they will cancel your property through legal means.
- As a long-term property investor, I am planning to invest in Dubai's realty market. What is your take on the current commercial property market and its future growth?
Investors are realizing that the Dubai realty prospects are not just built on residential exposures. While office space is not exactly the flavor of the season yet, it will soon catch the eye of the big players and investors. All of Dubai's prime commercial addresses, including free zones, are seeing extremely high occupancy, led by a mix of demand from existing tenants and new businesses putting up their nameplates.
Moreover, the future supply of commercial space, especially in the prime areas, is very limited. With current supply, commercial real estate is certainly looking towards a new boom cycle. Prime commercial areas include the Central Business District and Jumeirah Lakes Towers which have seen consistent upward trends in terms of sale prices and occupancy levels.
- Question of the Week: What is the law regarding the sale of off-plan properties as some developers do not allow investors to sell until the project is completed? My property is 15% paid, can I sell it or not?
One of the major reasons of the property crash was the flipping of off-plan properties. Without government control, investors used to pay 10% to 15% and used to collect 20% to 50% premium which created a huge imbalance in the market.
In general, developers do not allow an individual to sell an off-plan property until it is 40% paid; however, in the sale practice, it is a bit different. Investors pay 15% to 20% downpayment. There is a certain payment plan that follows, and the 40% payment generally becomes due one year from the date of purchase, and that is the basic reason behind the law. But in practice, a few months after purchasing an off-plan property, the buyer usually intends to sell it. In that case, either the seller or the buyer must make accelerated payments on the difference to the developer before obtaining an NOC for property transfer. Upon receiving payment in advance, one can sell his property.
We are also aware of one developer that is banning investors from selling their property until completion. In this case, it is between the investor and the developer, and on a case-to-case basis.
Source: Junaid Ahmed, Special to Freehold
The writer is Senior Partner - Ideal Homes Realty
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