Guiding potential buyers on a legitimate process to purchase property in Dubai from under construction project at the launch stage in primary sales from the property developer

Definition of Off-plan (Primary sale)

Any property purchased while under construction, directly from the developer, is termed as an off-plan (Primary sales) purchase.

RERA guidelines for developers to sell off-plan properties

• In order to sell a property/unit in an off-plan project, the developer must open an escrow account with RERA.
• The primary conditions to open an escrow account are that the land should be 100% paid, and a certain pre-approved percentage of the construction cost has to be deposited in an escrow account in an acceptable banking instrument
• An escrow account can only be opened if the drawings are approved by the relevant authority and unit numbers are fixed with its net unit area plus balcony area. The same area will reflect on the title deed.
• The draft of the sale and purchase agreement (SPA) has to be approved by the authority. SPA will also include the exact floor plan of the unit, along with specifications of construction and timeline for delivery of the project.
• The buyer will make all instalment payments in the escrow account only.
• The buyer will receive an Oqood (pre-registration certificate) upon paying the initial booking amount, along with 4% land department registration fees.
• The developer is only allowed to make payments related to construction costs and architect/engineering office fees from the escrow account.
• The land department conducts periodic inspections on the project and provides the project completion % on a time-to-time basis. Such information is publicly available on Dubai REST App.

Benefits of purchasing property in an off-plan project

• An attractive payment plan so funds can be planned well in advance
• Sufficiently long duration for project delivery to arrange for the funds
• As the project delivery time is a few years and payments are in instalments, so fair chances of making profits by reselling the property given the good market conditions
• Modern design, facilities and amenities in the community/building leading to better price appreciation and good future potential for rental income
• An off-plan project is very suitable for purchasers with flexible timelines to occupy the property, or for purchasers who are looking to make a profit through value growth

Important points the purchaser has to consider before selection of Off-plan project for buying

Selection of a developer

It very critical point if the buyer is going with the off-plan project. The buyer should check the credibility of the developer, the completion timeline and the delivery of past projects, construction quality delivered in the completed projects and after sales services

Selection of the location

The buyer should select the location considering his basic family objectives if he is an end user. If he is an investor who wants to make profit by reselling the property or if he is investing to earn rental ROI, then he should consider the locations which can have high potential for appreciation based on their geographical location.

Check the RERA escrow account compliance

The buyer should always check the full compliance of the RERA escrow account. The project escrow account must be opened. The buyer should make payment only in escrow account.

Selecting the RERA-licensed real estate agent

The buyer should be very careful in this step. It is necessary that the buyer chooses an agent who has significant experience in the Dubai freehold market, who knows the history of all the developers and who genuinely recommends the projects based on its merits (Not based on which developer pays him high commission). Signaturehabitat can definitely fulfil all these required check boxes of long experience and dealing with genuine developers since 2004.

Steps to purchase off-plan property in Dubai

Decide on the budget

It is very much necessary for a buyer to decide their total budget of an investment. The total cost can be divided in three parts, which are down payment, future installments and Dubai land department charges. Generally down payment is 20% of the property value with most of the tier A trusted developers. Dubai land department charges are 4% of the property value. Buyer does not pay any brokerage charges to the real estate broker as he receives his commission from the developer.

Consult/appoint a real estate agent

This is a very crucial step. Consult an agent based on his very long experience and depth of knowledge about the laws, developers, communities and future growth plans of the Government. His insights are extremely valuable.

Get the complete details about the project and the developer

As the purchase to be made in an off-plan project, the physical verification of the property is not possible. So the buyer should make his due diligence on the reputation of the developer, their past projects, delivery timelines, along with quality and court cases. Buyers should also check the floor plan of the unit, amenities within the community and the building etc. Your agent can be a great source to complete this due diligence. The detailed verification will save you from any future troubles.

Check the launch price and payment plan

Please check the price per sq ft of the unit based on location, quality, the brand reputation of the developer, specifications and amenities of the project. Also check the payment plan and its suitability with your funds arrangement.

Complete the legal formalities

Once all the above steps are completed, then complete the legal formalities of EOI (Expression of interest) if applicable, fixing the unit/units, signing the reservation/booking form, transferring the down payment amount in an escrow account and later on signing the SPA (Sale and purchase agreement). After signing the SPA, in sometime, the buyer receives the pre-registration certificate (Oqood) from the Dubai Land Department.

Handover of the property

The developer will notify the buyer once the unit is ready for the handover. The buyer can visit the property and can conduct snagging before taking the possession of the property. Once the unit is ready to the satisfaction of the buyer, the developer will hand over the keys to the buyer. The buyer will receive title deed and handover of the property after paying all financial commitment with the developer. The buyer can also avail mortgage for the last installment of the property as UAE banks are only financing on the ready properties.