Buying a home in UAE: Ready property vs Off-plan

By Zaki Ameer

DUBAI 26 January 2018: Buying off-plan has been bit of a dirty word since the dark days of the property crash in 2008, when scores of buy-to-flip investors were left out of pocket.

However, as speculated off-plan buying is making a comeback in 2018.

Most major developers now offer generous payment plans for their off-plan projects, yet in a bid to avoid a repeat of the 2008-2009 crash, there are restrictions in place to prevent an influx of buy-to-flip investors hiking the prices up for the end-user (the people that actually want to live in the property).

For instance, the UAE Central Bank’s rule allows only 50 per cent loan-to-value ratio, meaning you need to stump up 50 per cent of the property value in a deposit. This avoids investors putting down low 10 per cent deposits, only to resell the property at a sky-high price at the expense of the person who actually wants to live in the building (i.e. you).

You don’t need as much cash as you think

While you will need a hefty lump sum in savings as a deposit, the good news is that this doesn’t always equate to 50 per cent of the property value. In some instances, the cash deposit required can be as low as a 20 % initial payment. How? Well, the property developers recognise that not many people have as much as a 50 % deposit saved and are coming up with their own payment plans to get would-be buyers a foot on the ladder.

These plans include 30:70 plans where you pay 30 per cent first and the remainder on completion, and many payment plans now allow you to pay in 10 per cent instalments as each phase of construction is completed.

Off-plan is cheaper than ready property

Buying off-plan allows you to arrange your finances better and means you don’t have to be lumbered with a loan for the whole amount of your property. But there are, of course, advantages to buying a ready property: with house prices down, coupled with tricky off-plan mortgage rules, there has been a boom in ready property sales. However, it’s generally cheaper to buy off-plan (up to 30 per cent below market value), and that gap is expected to get bigger as developers work to drive interest in off-plan investment.

Reputed developers are back in business

One potential stumbling block would-be buyers may face when buying off-plan in Dubai is that UAE banks will not lend to all off-plan projects. The decision largely comes down to the developer and their credentials. But the big players – Emaar, Akoya by Damac and Azizi – have all secured mortgage lending for their off-plan projects. Going with a reputed developer that the banks recognise will also ensure your money is safe-guarded from rogue developers.

Only legitimate developers can advertise property for sale

Since October 2016 regulations came into effect which require developers and brokers to get approval from Dubai’s Real Estate Regulatory Authority (Rera) before they advertise property in the media. The new regulation is aimed at cracking down on fake property ads, protecting both buyers and genuine developers.

Note: Zaki Ameer is from Dream Design Real Estate (DDP)