Things to know about off-plan investment

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A significant part of any sound investment portfolio is an allocation towards property. When investing in real estate, one can either opt for a ready, visible-to-the-eye property, or an upcoming off-plan project. Over the years, while there has been a uniform consistency in the demand for ready property, the off-plan property market segment has witnessed considerable growth of interest.

The most obvious advantage of purchasing an under-construction property vis-à-vis a ready-to-move one is the cost. Statistics reveal that the difference in cost can be as much as 20% and hence the demand, not to mention the capital gains that the property can provide at the time of completion with the assumption that overall market prices continue to maintain an upward trend.

Off-plan property also becomes an attractive option in the light of staged payment plans offered by developers. With today’s stricter mortgage regulations, a flexible, well-spaced-out payment schedule can provide the much-needed cushion to investors. The Central Bank allows banks to provide 50% financing to all off-plan property investors.

On the other hand, the biggest disadvantage is fear of the unknown. What if the project is delayed or kept on hold indefinitely? What if the property market dives and the value of the off-plan property falls considerably?

Having said that, as an avid property investor, there is no reason to shy away altogether from what might seem like a potentially lucrative investment. While there are obvious risks associated with purchasing an off-plan investment, there are certain ground rules to be followed to ensure that you do not strike up a raw deal.

Be aware; familiarize yourself with the exact location, size and specifications of the unit that you wish to purchase. As far as possible, invest with developers who are recognized in the market. For the other not-so-well-known players, conduct a thorough due diligence based on history and recommendations.

It is encouraging to know that the Dubai Land Department (DLD) has put in place stricter laws to ensure a significant degree of consumer protection. Developers are now mandated to pay the land in full, register all off-plan projects with RERA and finish at least 20% construction before selling units.


Handy Hints

• According to latest research, Dubai’s off-plan sales market remains buoyant

• Central Bank allows banks to provide 50% financing for all off-plan properties

• Off-plan property investments are suitable for investors willing to wait it out



Source: Priyanka Wade, Special to Properties

The writer is a freelancer



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