Professional speak on off-plan developments

Off-plan developments on the riseThomas Bunker

There have been significant changes in Dubai’s property market over the last 10 years including off-plan developments. Currently, developers have started off with lots of activity in this area. Here, Thomas Bunker, Manager - Off-plan Division, Better Homes, provides a holistic view of the sector.


The government has introduced property laws which have regulated developers.

By-Law No. 85 (2006) introduced regulations for property broker operation and licence. This brought some order to the broker industry. Today, without passing the RERA-regulated property course and exam, one cannot sell property. This has somewhat thinned the ranks.

Law No. 8 (2007) commenced escrow regulations where developers could not overleverage themselves over a number of projects. Previously, a developer would reserve a piece of land, market the project off-plan and then use the initial funds from investors to reserve second and third plots to repeat the same scenario. Today, every dirham a developer accepts towards a particular project goes into an escrow account opened exclusively for that project. This has slowed down the number of projects that one developer can have at the same time.

Law No. 16 (2007) established that a developer must have a RERA-approved escrow account in place before it can market a project and get a licence for it. In addition, before selling a project, a developer needs to prove its case by providing proof that the project can be financed to completion without risk to the investor and the developer.

Law No. 13 (2008) launched off-plan rules that addressed safety for investors and developers in the event either one defaulted or if the project gets cancelled by RERA. The law also limited the amount of money developers could charge for an NOC. Later, the 2013 Decree No. 21 allowed projects to be liquidated if they got cancelled.

Collectively, these laws have made the investors more confident to invest here and ensured that developers need to be appropriately equipped to launch projects.

Recently, there have been some additional market-generated changes that have impacted the off-plan sector.

Some developers have put restrictions on how soon an investor can resell a unit.

Banks have placed lending caps on mortgage financing and the Dubai Land Department has doubled the transfer fees.

Risks for developers and buyers

The riskiest part of a development, aside from the actual building of the project, is probably sales.

Can a developer sell his product to mitigate his exposure to the development costs?

Previously, a developer would simply sell through pictures in a brochure. Today, the market is a lot more discerning in terms of a developer’s track record, good location, qualified staff/partner agency/contractor, quality marketing and a proper office/showroom, which can all impress an investor. Projects are no longer sold over coffee at any coffee shop.

Developers have also become creative with their payment plans. Each project has a different payment scheme, which is done to stay ahead of others.

The developer should ensure which segment of the market he is catering to, price the product aptly and build a qualitative project.

Today, investors need to know they are getting value for money.

Some developers are going the extra mile and organising finance for the entire tower via a bank. Projects are sold on developers can attract buyers more easily.

All of these efforts allow the developers to liquidate their stock quickly and efficiently thereby mitigating risks.

What to expect in the next five years

It is going to be both exciting and challenging. Developers are starting to listen to what the market wants. Some of the projects in the pipeline are quite amazing and more could be coming up. The challenge is in the selling of units. Payment plans, pricing and promotions are all going to come into play.

Investor tips for evaluating a project

* Does the developer have a track record in developing and completing projects properly? Is the developer licensed by RERA?

* Is any bank willing to back the off-plan project?

* Who have they appointed as architects and contractors?

* Have they teamed up with a retail bank to provide end-user financing at any point?

* Who have they appointed to market their project?

* How does their project compare with similar projects in the same community?

Source: Arva Shikari, Special to Freehold

For Rent


View more properties

For Sale


View more properties