A guide to buying property off-plan in the UAE

The global economic and real estate crisis has been a stark reminder that buying property off-plan in the UAE carries the inherent risk of non-completion.

However, this doesn’t mean you should strike off-plan buying completely off your portfolio,  just proceed with extreme caution. Our series of articles looks at some dos and don’ts of buying property off-plan, specifically in Dubai,  and how to mitigate the risk of losing your investment.

A property may not be what it seems
First-up, buyers should be wary of advertised developments which do not carry the Real Estate Regulatory Agency’s (RERA) approval stamp. They should also be aware that the end-result may not match the pictures and promised facilities.  mMaterials used and sizes of apartments can, and do, change. However, over time Dubai’s Land Department and RERA have reacted to complaints and are increasingly implementing regulations to protect investors in this respect.  At the end of 2010 RERA announced that it would introduce the Real Estate Investor Protection Law (REIP) but at the time of writing (August 2011), investors, developers and industry watchers are still waiting for further news on this move.

Even when regulations are in place however, they are not always heeded by developers.  Boom excitement, followed by increased construction costs and then the downturn forced developers to save on specs, including interiors. Commonly, contracts carry a clause that specs can be changed on the discretion of the developer but there should be room to negotiate this clause these days.

A developer will be fined if he delivers a unit with a square footage over 5 percent smaller than agreed and equally cannot charge the buyer more if they deliver a unit, which is over 5 percent larger. A word of warning though, arguments persist over how units are measured.

Similarly, a buyer should ensure that agreed parking spaces feature in the interim register along with the unit. There have been instances where developers backtracked on the understood agreement and tried to charge buyers on handover.

Regarding valuations - potential investors should consult a trustworthy - RICS (Royal Institution of Chartered Surveyors) certified valuation expert - to ensure accurate valuation and risk potential.

Tip:

A project carrying the RERA/LD Tayseer approval stamp could be a more secure investment. These are select, over 40 percent completed projects, which imply a certain amount of government backing, including completion on time. They are financed via a Dubai Government-backed scheme which selects banks to finance these developments within a framework ensuring returns.

Selected projects should be available in areas like Dubai Marina, Business Bay, and Jumeirah Lake Towers. 

More:
Part two: buying property off-plan in the UAE - the developer
Part three: Buying property off-plan in the UAE - legal matters
Ask a Lawyer - legal Q&A on propertyfinder.ae
RERA (Real Estate Regulatory Agency) website