With over 160,000 off-plan properties launched in Dubai last year, the real estate market has seen significant expansion, providing buyers with a wide array of options. This rapid growth emphasizes the importance of thorough research; relying solely on price as an indicator of value is increasingly inadequate.

Understanding Upfront Costs

Buyers should approach the initial costs of off-plan purchases as essential and budget for them early in the process. Amany Rajab, Senior Research Manager at Arada, points out that the Dubai Land Department (DLD) fee is a standard obligation during off-plan transactions, typically paid when the Sales and Purchase Agreement (SPA) is executed. This fee, along with the booking amount, should be integrated into the overall budget from the beginning. Furthermore, additional costs may arise. Eddy Nemri, Vice President of Sales at Object 1, mentions that buyers should be prepared for trustee or administrative fees, which can range from approximately Dh580 to Dh4,000. Off-plan transactions also necessitate Oqood registration, which is often covered in developer fees but may occasionally appear separately.

Brokerage Fees and Cost Savings

Another advantage of the off-plan market is that buyers typically incur no brokerage fees, significantly lowering the overall expense. According to Nemri, this is a stark contrast to resale properties, where buyers often face around 2% in commission fees plus VAT. This aspect of off-plan purchases makes them more financially appealing for those entering the market.

Mortgage Approval Considerations

Initially, off-plan purchases usually proceed without the involvement of banks. Rajab explains that mortgage pre-approval is unnecessary unless the buyer plans to finance their purchase, as the early stages usually involve making booking payments and construction-installment contributions directly to the developer. As the project nears completion, mortgage pre-approval becomes essential for buyers seeking financial assistance. Typically, this pre-approval process takes between three to seven working days and remains valid for 60 to 90 days. Many buyers take action early, reserving their units while arranging financing later on, assuming their income and credit scores remain stable.

Market Payment Plans

Payment plans play a critical role in determining affordability within the off-plan market. Research from Arada indicates a strong demand for structures such as 50/50 or 60/40, which require buyers to make most payments during construction, with the remainder due at handover. Rajab notes that post-handover payment plans are becoming less frequent due to increased developer confidence and market absorption rates. However, attractive buyer-friendly options still exist, particularly in competitive launches, such as plans with 60/40 or 70/30 structures featuring lower initial down payments connected to construction milestones. These alternatives alleviate financial burden and allow investors to start earning rental income before finalizing their payments when post-handover plans are available.

Understanding payment schedules and annual service charges is crucial for effective financial planning. Mikhail Podkopaev, Sales Director at MERED, emphasizes that comprehending staged payments enables buyers to manage ownership more systematically and avoid unexpected expenses later in the process.

In conclusion, entering the off-plan market in Dubai presents unique opportunities and challenges. Buyers who invest time in understanding costs, financing options, and payment structures are more likely to navigate the complexities of property ownership successfully, ultimately reaping the rewards of their investments. The key lies in staying informed and planning strategically for both the present and future ownership responsibilities.