UAE off-plan property buying guide

How popular are off-plan properties in UAE?

Off-plan properties in UAE are gaining popularity due to the numerous advantages they offer, including higher return on investment, more payment flexibility, lower initial prices compared to ready properties, and greater customisation options for buyers. For instance, in Dubai's dynamic and fast-paced property market, early investors have often achieved significant profits following the completion of mega projects in hotspots like Business Bay, Jumeirah Village Circle, and Downtown Dubai.

The UAE’s reputation as a world-leading tourism, finance and business destination has further boosted property investments in the country. The allure of high-end living and world-class amenities attracts buyers from around the globe. Moreover, the strict laws and regulations imposed by the government agencies and RERA protect buyers from project delays, cancellations, and fraud, ensuring a secure investment environment. These regulations enhance investor confidence, making off-plan properties an attractive and reliable option.

What are the statistics of off-plan property investments in the UAE?

Here are some statistics on off-plan properties across leading Emirates of the UAE:

Dubai

Dubai makes for a compelling case study to understand the demand of off-plan properties in the UAE. Data from DLD has revealed a remarkable 72.3% increase in Dubai's off-plan property sales last year. In 2023, off-plan property sales were valued at over AED 160 billion, a significant jump from AED 93 billion in the previous year. The number of units sold also saw a substantial rise, with off-plan transactions increasing from nearly 43,151 to 68,783 units, marking a 59.4% increase. This surge made 2023 the best-performing year for Dubai's off-plan sector. In comparison, the existing/ready sales transaction volume grew by only 20.7% in 2023.

According to Property Monitor, Jumeirah Village Circle (JVC) and Dubai Hills Estate emerged as the most prominent areas for off-plan investments in the Emirate. JVC, in particular, recorded an impressive 174% increase in off-plan sales, highlighting its growing appeal to investors. Dubai Hills Estate also saw a significant boost, with off-plan sales increasing by over 80%. These areas are becoming increasingly popular due to their strategic locations, comprehensive amenities, and strong potential for future growth.

Abu Dhabi

Like Dubai, off-plan property sales in the UAE’s capital have also spiked tremendously. Property Finder revealed an incredible 95% increase in Abu Dhabi's off-plan property transactions in 2023, whereas the actual value of off-plan sales between 2022 and 2023 rose by 174%. These numbers are a testament to the growth in investor confidence when spending on off-plan projects. Interestingly, out of the total 14,000 (approx.) real estate transactions in Abu Dhabi last year, valued at AED 44 billion, nearly 10,000 (71.4%), valued at AED 35.6 billion were for off-plan properties.

Among the top investment districts in Abu Dhabi - Yas Island, Al Reef, Al Reem, Khalifa City, Saadiyat Island, Al Raha Beach and Masdar City were most favoured for their upcoming luxury homes and villas with rental yields averaging over 6%.

Ras Al Khaimah (RAK)

Considered a much more affordable investment destination than Dubai and Abu Dhabi, the Emirate of Ras Al Khaimah (RAK) is fast transforming into a sought-after hospitality and tourism hotspot, with the UAE's first casino underway at the Wynn Marjan Island Resort. According to market reports, sales prices in RAK increased by 18.5% last year, while rents increased up to 11%. With even more bookings in H1 2024, RAK Properties, a leading developer, is targeting sales of AED 3 billion this year, 25% more than last year.

Popular investment areas in RAK include Al Marjan Island, RAK City, Mina Al Arab and Al Hamra Village.

What are the benefits of buying off-plan properties in UAE?

Investing in UAE’s off-plan property market offers several compelling benefits:

Higher return on investment (ROI)

One of the primary advantages investors seek in off-plan schemes is the potential for a higher return on investment. Since the property is in the pre-development or early construction phase, the initial price is often lower compared to ready projects. Most off-plan properties are located within massive communities boasting world-class amenities. Once these developments are completed, they significantly boost the property value, offering substantial capital growth prospects for early investors.

Flexible payment plans

Off-plan properties come with flexible payment options linked to the construction milestones of the scheme. These staged payments allow investors more time to manage their finances and arrange funds accordingly. This is especially beneficial for cash purchases, where the entire amount is paid without financing. Flexible payment plans provide financial relief and make the investment process smooth and more manageable.

Choice of location and amenities

Investors buying off-plan get to choose from prime and upcoming locations across the UAE, staying ahead of the market. In a country known for its towering skyscrapers and luxurious villas, developers compete to attract buyers with state-of-the-art amenities such as sky pools, golf courses, and other world-class leisure facilities. By investing in the project at an early stage, buyers are more likely to secure properties with the most upgraded and desirable amenities.

More customisation

Investing in an off-plan property allows buyers to have more input into the design and layout of the property, enabling potential customisation to suit a particular market or tenant type. However, the extent of customisation offered will always be subject to the developer's terms and conditions. This flexibility allows investors to tailor their properties to meet their needs or those of prospective tenants, enhancing the property's appeal and potential rental income.

What risks to consider when buying off-plan properties?

While there are many benefits associated with investing in off-plan UAE properties, buyers should be aware of potential risks as well, such as:

Delays or Cancellation

One of the biggest risks of investing in off-plan developments is the potential for delays or cancellations, which is applicable to UAE properties as well. To overcome this risk, it is crucial to conduct thorough due diligence on the developer’s track record and the financial viability of the project. It is advisable to choose reputable developers with a proven history of delivering projects on time. Many major developers have established track records of delivering off-plan projects as promised and on time, which can provide some reassurance.

Market Volatility

Property markets are subject to fluctuations, and the UAE is no exception. Despite expert predictions that the country’s real estate market will outperform other prime markets in the coming years, there is always a risk of market downturns. Off-plan investments have the potential for high returns, but they also carry the risk of losing value if the market experiences a decline. It is essential to have a long-term investment perspective and be prepared for the natural cycles of the market.

Regulation changes

While the UAE is known for its transparent and well-regulated real estate market, investors should stay informed about any changes in regulations that could impact their off-plan investments. Regulatory adjustments can affect everything from property taxes to ownership laws. Engaging a reliable real estate advisor or legal expert can help investors navigate these regulatory complexities and avoid potential pitfalls.

Developer restrictions

Some developers in Dubai may have specific policies that require the investor to pay a certain percentage of the off-plan property’s value before they can sell it to another buyer. These restrictions can limit the flexibility of investors looking to secure an immediate profit by quickly selling their off-plan properties.

What are the steps involved in buying an off-plan property in the UAE?

Buying off-plan properties in the UAE is a straightforward process that offers numerous benefits for investors. Here’s a step-by-step guide:

i. Developer and location research

This is the most crucial step. Investors should be clear about their budget and investment goals. Conduct thorough research on the developer's reputation and past projects, as well as information about the location, payment plans, and potential returns. This will help narrow down the right developer and location to proceed with.

ii. Arranging finances

Whether through cash or a mortgage, non-resident investors should secure financing in advance. Ensuring funds are available before proceeding with the purchase of off-plan properties is essential for a smooth transaction.

iii. Booking the unit

Once you have selected the developer and project, reserve your preferred unit by paying a reservation fee to the developer. This is often the first stage of the payment plan and locks the property in your name.

iv. Signing the agreement

Carefully review the sales agreement provided by the developer with the help of a legal expert. It's important to fully understand all the terms and conditions, such as the payment plan, completion date, selling clauses, etc.

v. Timely and staged payments

Make payments according to the payment plan agreed upon in the sales agreement. These payments are typically linked to construction milestones.

vi. Snagging and handover

A final inspection of the property is conducted after completion and before handing it over to the buyer. This step usually concludes with the final stage of the payment plan, ensuring everything is in order before the transfer.

vii. Registration and title deed

Buyers must register their property with the local Emirati government (example: DLD for Dubai properties) and obtain the Title Deed to confirm legal ownership of their property once it is completed and ready for possession. The registration will cost 4% of the property's value and is charged in addition to the AED 3,000 Oqood fee charged at the time of temporary registration of the off-plan property.