DATE: 23 Aug, 2023
Real estate currently under construction, is known as off-plan real estate, is a recent trend in the real estate market that reflects the present era. At this time, intangible factors like promises, expectations, and commitments often hold greater value and yield more profit than investing in or purchasing something already existing.
Engaging with off-plan real estate is a somewhat risky venture if approached without adequate preparation. However, with careful selection of the right location and property investments, real estate can yield substantial profits with relatively low associated risks.
In this context, the selection of both the location and the property is of paramount importance. This is due to the prevailing global economic model, which involves specialisation in production across national markets. Each market focuses on producing a narrow range of goods where it excels the most.
Consequently, amidst the diversity of national real estate markets, mature and developed ones are well-suited to attracting foreign investors, and risky markets are only suitable for the daring breed of investors. The UAE market, particularly Dubai, falls into the former category. It boasts a significant real estate sector that the government actively regulates to ensure safety.
We will talk about the reasons why investing in such a mature market as that of Dubai can be profitable, why real estate property developers in Dubai are keen on selling properties under construction, and what specific factors draw investors and regular buyers to invest in unfinished products.
FIVE MOTIVATIONS FOR PURCHASING PROPERTY UNDER CONSTRUCTION
While there are numerous reasons an investor or an expat might consider purchasing property under construction, we will focus on five key factors:
1. Attractive Prices and Abundant Options
As described earlier, the inherent nature of real estate under construction leads to competitive pricing. Property developers in Dubai vie to offer the lowest price and appealing payment plans. Depending on factors like location, property type, quality, brand reputation, and market demand, the price difference between unfinished and completed properties can range from 10% to 60%. Payment plans can vary too, spanning pre-construction-only to stage-by-stage plans before and after delivery.
2. Lucrative Returns on Investments
The UAE boasts some of the world’s highest real estate Return on Investments (ROIs), ranging from 8% to 15%. The mature yet evolving market offers secure options for investors while continuously expanding to present various highly profitable investment avenues.
3. Substantial Rental Income
Renting out property is a primary means of generating revenue from real estate, which is also true for residential projects in Dubai. Even prior to fully paying off the property purchase amount, an investor can earn rental income through careful planning. Each market’s rental sector draws from unique growth sources, necessitating research into the specific region’s characteristics. Dubai, for instance, heavily relies on tourists, expats, businesses, and migrant workers.
4. Capitalising on Price Appreciation Cycles
Off-plan real estate represents an opportunity for growth. Property value naturally rises due to various price increase cycles, including construction progress, market demand growth, economic expansion, and area development. Investors can also resale properties before project completion, avoiding prolonged commitment.
5. Investor Safeguards
The centralised real estate market in the UAE, particularly in Dubai, is overseen by regulatory agencies such as DLD and RERA. These entities manage all aspects from legislations to dispute resolution, ensuring a range of protections for buyers of under-construction property. These safeguards include compensation for project cancellations, protection against construction delays, fraud prevention, and secure payment processes through approved banks.
Investing in or buying property under construction is inherently risky, underscoring the importance of meticulous market, property, and developer selection. Essential criteria include investing in mature markets, the developer’s reputation, and the property’s valuation within the market context.
Thoroughly researching the market and comprehending government regulations’ impact on deposit safety and profit prospects will also be of crucial importance to you. Furthermore, understanding the available market advantages for investors and buyers will help you mitigate potential losses as well.
In conclusion, while off-plan real estate carries risks, strategic investment decisions within mature markets like the UAE can yield substantial rewards for those looking to make the most out of their investment.