Owning a property in Dubai has become easier, with off-plan properties offering a lower entry price point. Also, off-plan properties are becoming increasingly popular, accounting for a share of 68% of the overall Dubai real estate market transactions.
Here’s a detailed guide to off-plan properties in Dubai, its rules, buying process, and the risks to consider.
- Meaning of Off-Plan
- Regulations for Off-Plan Properties in Dubai
- Why Do Buyers Choose Off-Plan Properties?
- Off-Plan Property Market in Dubai
- Pros and Cons of Buying an Off-Plan Property
- Risks of Buying an Off-Plan Property
- Process of Buying an Off-Plan Property
- How to Sell an Off-Plan Property
- Off-Plan vs Ready Property
- FAQs
Key Takeaways
- Off-plan properties in Dubai represent 68% of real estate market transactions, offering lower entry prices for buyers.
- These properties involve buying directly from developers during construction, with Oqood registration.
- Legal protections exist for buyers, including escrow accounts.
- Buyers can track project progress via the Dubai Land Department.
- Buyers choose off-plan properties for lower prices, flexible payment plans, and potential residency benefits.
- However, risks include delays, potential project cancellations, and fluctuating market conditions after handover.
What Does Off-Plan Property Mean?
Off-plan property is an under-construction project that you can buy directly from the developers. You can check the floor plans, building plans, renderings, model property, and brochure before buying a project.
Also, once you buy off-plan property, you won’t get a title deed. There will be an interim registration in the DLD system called Oqood, a formal record of ownership until handover.
Key Terms for Off-Plan Market
- Developer: The company building an off-plan project.
- SPA: It’s a sales and purchase agreement between the buyer and the developer. This agreement includes project completion and handover dates, payment plans, and other terms and conditions.
- Oqood: The off-plan registration system.
- Escrow Account: It is a bank account that holds the buyer’s payments. The payments are released after developers achieve a certain milestone in the project.
- Snagging Survey: After the project’s completion, buyers can inspect the property, and developers will fix issues.
- No-Objection Certificate (NOC): Owners can request an NOC from the developer to resell off-plan or completed property.
Legal Protections for Off-Plan Property Buyers in Dubai
Dubai Land Department (DLD) has enforced certain laws and regulations to protect off-plan property buyers and ensure smooth transactions.
Escrow Account
It protects the buyers’ payments. When a buyer makes a payment for an off-plan project, it goes into an escrow account at an approved bank. The developers receive these funds upon verification of project milestones.
So, the buyers must pay into the escrow account mentioned in their contract to avoid any risk.
Project Permits and Tracking
The developers must obtain a permit from the Real Estate Regulatory Agency (RERA) to sell the off-plan properties. The buyers can track the projects’ legalities via the DLD website.
Payment Plans According to Construction Milestone
Developers provide payment plans based on the construction milestone. Buyers can track the progress of the off-plan project on DLD’s website when the developer requests payment.
Defects in the Project
The developers are liable for one year for normal defects. Also, they are liable for 10 years for structural defects.
Cancellation of Projects
If RERA cancels any project, buyers receive the refund of that amount. Moreover, RERA regularly checks the project’s progress. If the construction is slow or halted, RERA provides time to fix it. However, if the project’s progress is still halted, the authority cancels the project and refunds the amount to the buyers from the escrow account.
Why Do Buyers Choose Off-Plan Properties?
The investors and buyers choose off-plan properties due to the following reasons:
- Off-plan projects have a lower entry price
- Buyers can get a launch discount
- The developers offer payment plans according to the construction milestones, and sometimes beyond the handover
- Buyers can get a better choice of floor, view, and layout
- When you buy an off-plan property in Dubai, you can be eligible for a residence visa, and if the property is AED 2 million or more, you can get a Golden Visa
Off-Plan Property Market in Dubai
Dubai’s real estate market is ever-growing, and you can see new project announcements regularly. Off-plan properties have given buyers and investors a low entry price point. That’s why their market share in DLD transactions is higher than that of ready properties in the secondary market.
The off-plan market takes 68% of the market share, whereas ready property transactions account for only 32%. Moreover, the luxury off-plan real estate market has seen an increase of 27%.
Pros and Cons of Buying an Off-Plan Property
Pros
- Off-plan properties are available at affordable prices compared to ready properties
- It offers flexible payment plans for buyers
- Off-plan properties ensure modern design, smart infrastructure, and better amenities
- Off-plan projects may have price appreciation before handover
- Buyers have extensive choices for off-plan properties in different areas
Cons
- Off-plan projects may face construction and handover delays
- These properties don’t have any rental income when in the development phase
- Market changes may cause a fall in price, but demand for newer properties in Dubai keeps rising
- The final project may have quality issues and may look different from the brochures
Risks of Buying an Off-Plan Property
Alongside its many benefits, there are some risks worth considering when you buy an off-plan property in Dubai.
Delays
The first main risk is project delay. That said, an SPA mentions an expected completion date plus a grace period.
While top developers in Dubai deliver their projects on time, some off-plan projects face handover delays. If a project is incomplete even after the grace period, buyers can request cancellation of the SPA with the developer and a refund. Moreover, the buyer can raise a complaint at the real estate court.
Project Cancellation
Cancellation of an off-plan project is rare, but it can happen if the progress is slow or halted. In this case, RERA cancels the project, and the buyers receive a refund from the developer’s escrow account. That’s why payments outside escrow are risky.
Additionally, it is recommended to buy an off-plan property from a reputed developer to avoid cancellations or delays.
Market Conditions
Another risk worth noting is market conditions after the project handover. Although off-plan projects offer a lower entry point, the market prices can be up or down at the time of handover. As a buyer or investor, thorough research before purchasing an off-plan property helps you avoid this risk.
Process of Buying an Off-Plan Property in Dubai
If you know how to buy a property in Dubai, purchasing an off-plan property is easy, with a few extra steps:
- Set your budget, goal, and preferences
- Submit a property buying inquiry in Dubai.
- Research newly launched projects and check the developer’s reputation and history.
- Make sure you confirm that the project is RERA-registered with an escrow account. Also, check that the completion status matches the DLD records.
- Choose a unit and payment plan. Check that the payment plan is in accordance with the completion status.
- Pay an advance to book the unit.
- Sign the Sales and Purchase Agreement (SPA).
- Register Oqood and pay the DLD registration fees.
- Track construction via the DLD website and pay according to the completion status in the escrow account.
- Inspect the property after complete construction and handover.
- Inform the developer of any fixes (if required).
- Move into the new home or rent it out depending on your goals.
How to Sell an Off-Plan Property in Dubai
As an investor, you can sell an off-plan property in Dubai while it is under construction. Here’s how to sell it:
- Review your SPA to check if you can sell your off-plan property.
- Obtain an NOC from the developer to sell the off-plan property. NOC fee varies from AED 500 to AED 5,000 and more.
- Must pay 30% to 40% of the property’s value to the developer before selling.
- Find a buyer by submitting a property selling inquiry in Dubai.
- Sign Form F.
- Transfer Oqood to the new buyer.
Off-Plan vs Ready Property
| Factor | Off-plan | Ready (completed) |
| Price | Often lower entry price | Usually higher |
| Payment | Payment plans | Mostly upfront or mortgage |
| Handover | After 2 to 4 years | Move in or rent out quickly |
| Rental income | None until handover | Immediate |
| Resale | Needs developer NOC and a minimum payment | Normal transfer through a trustee office |
FAQs
Yes, off-plan is a good investment, but you need to consider the risks. Also, you need to complete due diligence and research the developer properly to avoid construction delays.
Yes, but banks usually lend less on off-plan properties than on ready properties, with a 50% LTV. As an off-plan buyer, you can opt for payment plans offered by developers according to the completion status. Some even offer payment plans for after handover.
These were all the details about the off-plan properties in Dubai. When buying an off-plan property, consider the risks and research the market thoroughly. Also, you can look for ready properties for sale in Dubai and find a good distressed deal directly from the owner.
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