What does off-plan property mean?

Understanding an off-plan property

There are different property types in Dubai, including:

• Apartments 

• Penthouses

• Townhouses 

• Villas 

Typically, if you are looking for a property to move into, you would choose one of these options that has already been constructed so that you can move straight in. But, off-plan properties are different from this.

Definition of off-plan property 

So, what is an off-plan property? Off-plan is a property/project in Dubai that is still under construction or in the early planning phase. 

Buyers generally purchase an off-plan property at lower rates and can expect high-value appreciation once the property is completed by the developer. 

Key characteristics of an off-plan property 

Certain characteristics of an off-plan property include:

• Detailed architectural plans and 3D models to help buyers gauge the property’s potential 

• Buyers often buy a property based on the developer’s reputation in the real estate market and the property's location

• A lot of financial planning is involved in off-plan properties to protect buyers and guard yourself from potential market fluctuations.

Benefits of investing in an off-plan property 

Like every property type, there are both advantages and disadvantages to buying an off-plan property. There are several benefits of off-plan that encourage buyers to opt for this option in Dubai. 

Some of the benefits are: 

1. Lower prices and flexible payment plans

In comparison to completed properties, off-plan properties are usually much more affordable and lower than the market price for a finished property. Developers can also offer various discounts and incentives to buyers, giving buyers a higher value for the money they invest.  

The payment system is also comparatively flexible for off-plan properties with incentives such as post-handover payment plans, extended payment terms, waiver of registration fees, etc.

2. Potential for higher returns 

The return on investment (ROI) for off-plan properties is generally said to be high. Such properties often have a healthy capital appreciation (a rise in the unit’s market value) - sometimes even before the project is completed. 

Essentially, the buyer would be at an advantage by buying the off-plan property at a lower price and eventually being able to sell/rent their unit for a higher price. 

3. Customization options 

While off-plan properties already have detailed construction plans for the properties, it is possible for buyers to implement certain customizations to their units. 

Keep in mind that these customizations must be approved by the developer and adhere to the guidelines set by the Dubai Land Department (DLD).  

4. Potential for capital appreciation 

Depending on factors such as the developer’s reputation, the off-plan project’s amenities, the area the property is based in, and real estate market fluctuations, most off-plan properties have immense potential for capital appreciation. 

As the project nears completion and demand in the market increases, the projects value can appreciate. This is advantageous for investors who wish to either lease their off-plan property on completion or sell it eventually - hopefully giving them a much higher price for the unit than what they bought it for. 

Key considerations when buying off-plan properties 

Buying a property in Dubai is a significant decision and requires ample planning. If you are a buyer considering buying an off-plan property, here are some factors you should consider while making your decision: 

1. Researching developers

What is an off-plan property but the vision of its developer? It is important to thoroughly research the developer whose project you are considering. 

Some of the top property developers in Dubai include Emaar Properties, DAMAC Properties, Nakheel Properties, Azizi Developments, and more. Of course, there are various developers with a solid reputation in Dubai. While researching the developer, consider factors such as:

• How consistent they are with delivering high-quality projects within the set deadlines and budget constraints. 

• The developer’s current reputation in the industry. 

• The financial stability of the development company itself.

• Online reviews of buyers who have purchased from the developer. 

2. Understanding payment plans

There are various payment plans a buyer can opt for while buying an off-plan property. 

The most popular payment plan for off-plan properties is 80/20, wherein buyers pay 80% of the total unit price during the construction phase and the remaining 20% during the handover. 

However, there are many other payment plans that the buyer can discuss with the developer before deciding on a mutually beneficial one. Some other payment plans include:

• Deferred payment plan: Under this plan, a portion of the unit’s cost can be deferred to a later date - usually after the property completion. This is a more flexible payment option for those struggling to manage their finances. 

• Down payment: While the down payment is usually 10%-20% of the unit’s value, it is subjective according to the agreement between the buyer and developer. Certain high-end residences may require a larger amount as a down payment. 

• 60/40 payment plan: Similar to the 80/20 payment plan, this plan allows buyers to pay 60% of the unit’s value during the construction phase and the remaining 40% upon handover.  

• 50/50 payment plan: This plan allows buyers to pay 50% of the unit’s value during the construction phase and the remaining 50% upon handover. It could be a more balanced payment plan as it divides the payment between the two different milestones. 

• Post-handover payment plan: This is becoming an increasingly popular option whereby some of the payments are not required until after the property has been constructed. Typically, a post handover payment plan will include regular payments for a set period after handover, such as 2, 3 or 4 years post handover. This option could allow the buyer to use rental income to make the post-handover payments.

• 1% per month: Another increasingly popular option is one where payments are split at a rate of 1% of the purchase price per month. For example the buyer might pay a 20% downpayment followed by 1% per month over the next 80 months. This is a very flexible option that can be used to incentivize buyers.

Deciding on a suitable payment plan will help buyers plan their finances and budget for the future. 

3. Reviewing property specifications

An off-plan property will have a detailed structure, plan and renders provided, but the completed property may be subject to minor changes. 

Review property specifications such as:

• The size of the unit 

• The number of bedrooms

• Decorative and material finishes

Physical visits to the development site can help you discern the progress and whether the developer is aligning the project to the aforementioned property specifications. 

4. Legal aspects and contracts

It is important to know your legal rights as a buyer. 

The Oqood system is very effective and guarantees the rights of off-plan property investors and real estate developers. Understanding Dubai rules and regulations will also help you make an informed decision.

Any legal disputes between the buyer and developer can be resolved by approaching the Real Estate Regulatory Authority (RERA) Dubai. 

You will also be signing several contracts as an off-plan property buyer. These include:

• A reservation form: this includes your contact information, the details of the unit you have reserved, the agreed-upon payment plan, etc. You will be signing the form upon submission. 

• A Sales and Purchase Agreement (SPA): this is one of the most important documents of the process. It is a contract between you (the buyer) and the developer. The document states various details including property value, unit size and number, payment plan, the start and completion date of the project, along with the terms and conditions of the transaction. It is always recommended to go through a draft of the SPA before signing it. 

• Mortgage documents: whilst a mortgage cannot be obtained during the construction phase, you may be able to finance the handover payment using a mortgage. If you plan to do this, along with the aforementioned documents, to obtain an off-plan property on a mortgage, you will require documents such as:

  • Copies of a valid visa and passport 

  • Emirates ID copy 

  • A salary slip as proof of employment 

  • Copy of tenancy contract/DEWA bill as proof of residence 

  • Pay slips and bank statements for the past six months 

  • Latest credit card statements 

Understanding what the contracts are and how they aid you as a buyer will help you throughout the process.

Legal framework for off-plan properties in Dubai

The legal framework for off-plan properties in Dubai is created to protect the rights of both buyers and developers. Here are some key components of the legal framework to be aware of: 

Real Estate Regulatory Authority (RERA) regulations

RERA is a part of the Dubai Land Department which regulates the real estate sector in Dubai. It is mandatory for any developer to be registered with RERA. The developer must follow RERA regulations while constructing the property and the buyer must adhere to the legal process of buying an off-plan property. 

Escrow accounts

After the buyer and developer sign an agreement for the off-plan property, the developer must provide the buyer with details of an escrow account. Buyers can check the account’s legitimacy by visiting the DLD website. 

All payments should be made by the buyer to the escrow account, and these payments are only released to the developer once they achieve the agreed-upon milestones in their project. 

Developer obligations

The developer is obligated to keep their buyers updated with the project's progress and in certain cases, any delays. 

Delayed handovers are an issue for some off-plan properties, but the developer must hand over the property to the buyer (if they have fulfilled their legal obligations) as soon as possible after the agreed upon date.

Buyer rights and protections

Law No. 13 of 2008 states that buyers can reach amicable settlements with the developer either personally, through the DLD, or through the court in case of any dispute.

Popular off-plan property areas in Dubai

Dubai’s dynamic real estate market is subject to regular changes. Due to rapid construction throughout the city and an increase in demand from buyers and investors, there are various emerging neighborhoods and established ones as well for off-plan properties. 

Emerging neighborhoods

As of 2024, some of the most sought-after emerging neighborhoods for off-plan properties in Dubai are: 

• The Valley

• Dubai South

• Emaar Beachfront

• Damac Hills 2

• Jumeirah Village Circle

• Damac Lagoons

• Dubai Creek Harbour

Established communities

Here are some established communities in Dubai that are a popular choice among property buyers and investors:

• Dubai Marina

• Downtown Dubai

• Dubai Hill Estates

• Jumeirah Lake Towers 

• Business Bay 

Financing options for off-plan property in Dubai

There are different methods of financing an off-plan property in Dubai, for both developers and buyers. 

Developer financing

This pertains to how the developer finances an off-plan property. Developer financing is when the developer obtains the necessary funds to construct their project, in accordance with agreements, rules, and regulations made with RERA. 

Eligibility criteria for buyers

If you are looking to buy an off-plan property in Dubai, here are some criteria you may have to fulfill to prove your eligibility:

• Have enough cash for the down payment of the property, which is usually 10%-20% of the property value. 

• Not have any outstanding debts to private or government entities in Dubai. 

• Have a source of funds to make ongoing payments to the developer

Tips for a successful off-plan property investment

Here are some tips that will help you make an informed decision on a lucrative investment for an off-plan property in Dubai. 

Due diligence on developers

Conducting your due diligence on off-plan property developers is of utmost importance. Ensure to scrutinize a developer’s:

• Past projects 

• Standing in the industry 

• Deliverance of high-quality projects within the mentioned deadlines 

• Financial stability 

• Any past delays/incidents in previous projects 

Working with an accredited and trusted developer will reduce the risk of delays, poor communication, and dissatisfaction upon project completion. The right developer lays the foundation for a sound property investment. 

Staying updated on market trends

While Dubai’s real estate market has been relatively stable in recent times, like any other industry, it is not immune to fluctuations. 

Remaining updated with any changing market trends will help you decide when to invest in an off-plan property, what sort of payment plan to opt for, and even plan an exit strategy if you do not plan to keep the property long-term. 

Consulting with real estate experts

RERA-accredited real estate agents are a blessing for property buyers in Dubai, especially first-timers. There are several advantages to consulting with a real estate agent while buying a property:

• There is no need to worry about documentation or understanding the regulations of Dubai as the agent will be able to advise you

• Having ample knowledge and expertise in the real estate market, they can offer you tips on buying properties, inform you of changing market trends, and help you make the correct investment. 

• Real estate agents can provide a lot of clarity to potential buyers who are still confused about off-plan properties in Dubai. This helps buyers avoid confusion. 

• An experienced real estate agent will have access to all the top developers to give you all the latest information about new projects and the best available off-plan properties and opportunities in the market.

Future of off-plan properties in Dubai

What is an off-plan property? A new, modern property in an emerging market with immense potential for growth in the future. Here are certain insights on the future of off-plan properties in Dubai. 

Market predictions and trends

The Dubai real estate market is expected to experience a massive boost in 2024, with a growth of approximately 15%. With solid investment support and a thriving economy, the real estate market is set to be one of the fastest growing sectors.

Along with that, the city’s population is projected to grow from 3.5 million in 2023 to 7.8 million by 2040 - which would inevitably create a high demand for properties.  

Experts have these predictions in store for 2024:

• With some increase in new property supply, the increase in prices will moderate to between 5%-8%. 

• Technology will play an increasingly pivotal role in property showcasing, especially off-plan properties, with tools such as 3D virtual tours, AI technology, and blockchain transactions potentially leading the way in future. 

• Government initiatives will place more emphasis on affordable housing. 

• Sustainable and community living will be a priority for many buyers as developers will showcase more off-plan properties that are more eco-friendly and community-friendly. 

Impact of government policies

To boost investment and encourage new residents in Dubai to establish long-term roots, the Dubai government has implemented different policies to make the city a more buyer-friendly place. 

With the introduction of long-term visas, golden visas, and retirement programs, the government is encouraging foreigners to not only invest in Dubai but to become residents of the city. 

As of 2024, the Dubai government has committed to the Affordable Housing Policy, which aligns with the 2040 Urban Master Plan, which aims to provide job opportunities and meet housing needs.

Innovations in real estate development

Here are some innovations in Dubai’s real estate market to keep an eye out for:

• Emerging communities such as The Valley and Dubai South are offering both off-plan and complete projects that are geared towards family-friendly amenities, affordability, and proximity to key commercial hubs. 

• Various developers are focusing on sustainable projects with innovations such as energy-efficient features, smart home technology, and ample green spaces. A great example is Ghaf Woods by Majid Al Futtaim

• The DLD’s Real Estate Evolution Space (REES) Initiative aims to promote innovation and enhanced cooperation between the private and government sectors - utilizing technology for a more efficient market. 

This article summarized the various facets of off-plan properties in Dubai. From understanding the legalities behind purchasing an off-plan property to the benefits of owning one in Dubai, we hope this article addressed your question, “What is an off-plan property?”. With the potential for significant returns, various financial options, and the chance to customize your new home, these properties cater to all sorts of investment goals. As Dubai continues to evolve, investing in off-plan properties could be a smart step toward a rewarding future in this booming city.