When it comes to off-plan properties, investors and buyers are instantly pulled in by the opportunity. Considering the type of discounts and comfortable payment plans you get with off-plan payments, it’s only logical too. Especially when you consider a place like the emirate of Dubai that boasts exquisite waterfront properties for sale.
However, as wonderful as buying off-plan properties might seem with their 50/50 payment plans, it’s not always working out for everyone. There are a few complications that can jeopardize your entire venture if you don’t figure everything out right away.
So, let’s take a look at the most important things you should know before investing in off-plan properties:
There are a number of benefits to buying off-plan properties. For those who don’t know, off-plan properties are under-construction units of any development project. The main idea behind the off-plan investment is that you don’t have to pay the full amount of the property’s value. Rather, you get an investor’s discount as well as a comfortable payment plan that is usually 50/50 or a consecutive tri-monthly installment of specific percentages.
Depending on the developer and the project, each development can offer various discounts and plans. You might get offers of a discount on the total amount or perhaps a very easy plan that spans out to 2-3 years or even a combination of both. Not only do you get a brand-new residential unit with all its amenities and facilities associated with the community, but you also get the opportunity to flip it or rent it out as well.
For the most part, people prefer buying off-plan, possessing the property, and paying off the remaining sum with the rental yield they get. Other than this, the only other option for an investor is to keep the prices in check and sell at the time of most advantage.
Risks of Buying Off-Plan
While it might seem like the perfect idea to invest in off-plan properties, there are a few risks you should know.
Apart from corruption and theft, there are other scenarios that can put your investment at risk as well. Even if everything goes right and you get the property, rash or irrational decision making can also push your investment down the drain.
Falling Prices in the Market
The most common mistake anyone can make while venturing with off-plan properties is miscalculating the market trends. While it might prove profitable to sell out even on your second installment if the market prices rise, you run the risk of losing a potential investment whose value could increase even more. Similarly, if the market prices fall before you get the handover, you might be at the disadvantage. However, the property market cycle is always in motion and you’ll eventually find a time when the market prices will rise gently.
Your only worry is to make sure that you don’t sell out at a disadvantageous time. Moreover, being too quick in flipping your property can make you regret your decision if the market ends up supporting the venture.
Although not all, some developers have ended up going bust before they could complete the development they’re constructing. This could be due to any number of reasons including financial management, governmental decisions or faulty planning, etc.
Most people believe that if they have invested in a development project that has gone bust, their deposit is liked wasted. This isn’t exactly the case. There is a complete procedure that investors have to go through and their invested amount is returned.
To avoid landing in such a situation, choose a well-reputed developer like Aldar, Emaar, DAMAC, etc. Moreover, the specific project and its demand also play a role in determining whether the project will be completed or not. For example, considering the successes of all the waterfront developments in Dubai Marina, it’s certain that the new project, Stella Maris tower is going to be completed on time.
Long Stop Date
In the big world of real estate, it’s almost impossible to guarantee something as huge as a development’s completion. While you do get a specific date or month for completion, it’s almost always going to take more than that. And although a little bit of delay is anticipated as normal, there are cases in which there can be a long halt. In which case, you and other investors might be worried about their deposits.
This is why you should have your contract state a long stop date. This is the specified time that the developer has to deliver the project, otherwise, you’re free to walk away with your deposit. The long stop date is obviously not the originally confirmed completion date. It’s the maximum time the developer has before investors start walking away.