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The return of off-plan sales in the market is sparked by the Central Bank now allowing mortgage disbursals of up to 50 per cent of a property’s value. Earlier, developers were primarily targeting cash buyers while marketing off-plan projects but now it won’t be the case anymore as the Central Bank has announced complete support.
An off-plan project refers to a property that is being sold even before a structure is constructed on it. For an off-plan property to be viewed as highly saleable, it is critical that the locale is a lucrative one which means it has good schools, malls, restaurants, residential amenities and commercial structures. It could also be close to an important landmark or monument, making it an attractive proposition. In a rising market, such a property could be worth a lot in the coming years if there are possibilities of key infrastructure being constructed around it.
The recovering real estate market has prompted developers to introduce off-plan projects. One developer had announced they are selling a chunk of residences that will be built in the International City area.
The advantage of buying off-plan is seen mainly in the price difference. There is a cost advantage that can be availed of because the rates usually go up once construction is complete. Such plans are good and work well when the sun is shining on the economy but not when the market suddenly turns sour. During the recession that hit the UAE market a few years ago, a lot of investors were left stranded because the money they put into real estate projects went kaput. These projects were abandoned or frozen to a later date by the developers due to lack of finances. It was not easy for the investors to recover their money; some never got it back.
There are changes now meant for investor protection such as the renewed vigor in enforcing the compulsory requirement of escrow accounts, and rules that specify how much money can be used by the investors at different stages of construction.
• Off-plan properties highly saleable if there are amenities around
• The advantage of buying off-plan is in the huge price difference
• Off-plan project rates generally go up once construction starts
Source: Urmila Santosh, Special to Properties
The writer is a freelancer