An off-plan arrangement is one that allows people to invest in properties before they are built. It literally means you are investing in a property based on the plan before it materializes. Where there is a solid agreement (in writing please); you can purchase a property pre-development stage. Generally, here are some of the benefits of buying property Off-Plan in the UAE, Dubai:
- It is cheaper: Off-Plan value of a property is fixed at the market value at the beginning of the contract. Meanwhile, real estate is always growing, and increasing in value. So, if the off-plan arrangement is meant to last for three/ five years, you will not be paying the value in 5 years, but the value now. So, by the time the agreement matures, you would have made profits from the property if you sell it.
- Off Plan arrangements are also quite flexible. You get to pay in small amounts, across a period of time, making property acquisition more accessible and affordable. More so, you can sell your equity halfway into the project, or immediately upon completion.
For all those who want to buy apartments in residential complexes in Dubai, it is important to know and consider all of your options for a comprehensive understanding of the market before you complete a transaction. According to Emirates.Estate a large fraction of investors/ purchasers fails to appraise the various options available to them. You will be shocked at the bountiful payment packages that people use in completing their transactions. When you know all of these methods, you will be thrilled that you need not be a millionaire from the onset to be able to afford a home in Dubai. So, what are these payment options in the Emirati market?
Post Handover-Payment Plan
This payment plan became increasingly popular sometime in 2013, when developers, in order to compete in a rising and highly competitive market, started offering properties to purchasers prior to full payment of the purchase price. Today, Post Handover-Payment Plan (now referred to as PHPP) is one of the most popular payment styles for properties in Dubai. Please note that although you have the leverage of paying after ownership – meaning that you can pay at a later date, you will have to pay some portion of the purchase price pre-handover, as a commitment towards the transaction. The amount/percentage you will be required to pay varies depending on the special terms and your developer’s plan.
PHPP is very popular lately because it is a dream come through for the average investor/and the ordinary citizen who desires to own a property but cannot cough out all of the money at once. Many people now take PHPP, pay the deposit, and then place the apartment on rental. That is an interesting and wise investment model because the tenant will be paying his/ her rent to you which you will then be using to service the PHPP agreement. If you want the pre-payment plan to be over on time, you only have to increase your installments and pay within an earlier time, or apply for a revision of the post-plan agreement to allow you to complete it sooner. It is a great way to buy a property with a small instalment, while the tenants pay the reminder.
Down payment Plan
Purchases under down payment Plan have existed since the rise of the new Dubai. Dubai is historically said to have grown and become a place of abode sometime in the 19th century, and by the year 1822, it had about 800 residents. However, the new Dubai began in the 20th century with the oil and economic boom in the1970s. By 1990, Dubai was not only a rich city, but it was also very popular, and centers for tourism began to grow. It was around this time that a new real estate trend began to grow in Dubai.
Historians in the real estate sector say there are indications that the down payment plans began within the first decades of the real estate boom. This payment plan allows purchasers to pay a center percentage upon the start of the contract, while the remainder is split across all the other months of the contract. The down payment required is often 10 – 20%, depending on the party’s various preferences while the remainder 70/80% may be split across 24 months, more or less. The difference between a down payment plan and a PHPP is that ownership doesn’t completely pass until the property is paid for in full. Otherwise, it is a great installment payment model that assists average purchasers who want to do it all slowly.
Pre-Handover Payment Arrangements
Investors who still need cash and capital to run their projects do not find the Post Handover and installment plans funny. In such a scenario, delayed payment may stall the project such that it may never be completed due to lack of funds. So, some developers opt for Pre-Handover arrangements only. This class of payment splits payment into only two installments, a portion upon the start of the contract, and the second before the property is handed over to the new owner. The twist to Pre- handover arrangements is that the pre-payment is often higher or at best, equal to the final payment. It may be a 50-50 arrangement, or you may pay a first deposit of up to 80%.
This plan may be suitable for you. Other than paying in parts, it is actually good for purchasers because the developer has some cash flow to look forward to upon completion of their project. If you are dealing with a new company with lesser credibility in the market, you will have peace of mind knowing that the other half does not accrue till the property is nearly complete