Off-plan Property : Buyers must think long-term

Buying off-plan property is not about trying to sell 6 months down the line.

Dubai real estate is seeing continued growth in the off-plan sector, with transactions routinely outpacing secondary transactions on a month-to-month basis.

In February, the market hit a new high for sales volume, rising around 30.4 per cent year-on-year. New projects are launched like clockwork, and new master-communities were announced just this year. Investor confidence in the offplan segment has been further boosted by the recent delivery of projects like Tilal Al Ghaf, Cherrywoods and Arabian Ranches 3.

All in all, there is no better time to invest in offplan and there are a lot of investors who are eager to expand their portfolios. Before picking the right investment, I think it’s extremely important to take a step back and look beyond the numbers.

Good things take time

Where investors tend to stumble with offplan is the desire to earn a quick profit. Some attempt to flip their properties just six months into their payment plan, thinking that they can recoup their initial investment and make a tidy profit on top of it. This line of thought is often encouraged through bad advice provided by certain agents, who over-promise and end up leading their clients astray.

If it sounds too good to be true, it probably is.

Investing in offplan is definitely a game of patience and timing. You cannot hope to double your money within six months of putting a down payment, regardless of what your broker may have promised you. There simply hasn’t been enough appreciation in the value of that asset for it to be worthwhile.

You would need to be at a point where you’ve made around 70 per cent of your payments before you start to can achieve an appreciable RoI. So when is the best time to flip a property? Realistically, it’s at the time of completion. If we look at how previous off-plan projects have performed, the price can rise by anywhere from 10-30 per cent from the time it was launched to the completion date, subject to demand.

Do your research

If you are going to put a few million dirhams into a project that you intend to earn income from, you need to make sure that you know every important detail about it. I would always recommend doing your own research about any project – look up information on the developer and their track record, about the area that the project is in, and about similar projects that were launched in the past.

Now, you are armed with a list of questions that you can ask your real estate agent to make sure that you are getting the most comprehensive and accurate information from them. And a good agent will always back up their advice with relevant market data instead of just cherry-picking a handful of high-value transactions to skew your perspective.

Keep the future in sight

If you can find a project with a good payment plan, one that lets you pay around 50-60 per cent over the course of construction with the remainder expected post-completion, that provides good room for capital appreciation. Do bear in mind that you need to be in a position to keep making those payments months or years down the line, and many developers do not allow any resales until at least 50 per cent of the property has been paid off.

Which means that if you end up in a financial rut a few months into your purchase, you’ve just made a loss on your property. It goes back to the developer, who can then resell it at market price.
Keep an eye on the surrounding community and how the infrastructure is developing there. Any community that is still growing offers tremendous potential for capital growth as well. Are there retail spaces or shopping centres being built nearby?

Are there healthcare facilities and schools in close proximity (or are any being built within the community itself)? How does the road network look?

A prime example of this is Tilal Al Ghaf. Since the initial launch of the community, it went through a quiet phase around Covid and was then relaunched to great success. It has already started handing over its first phase of units, has properties going up for rent, has a school on the premises, and will benefit from continued improvements to the Al Khail Road network.

Investors who bought in Tilal Al Ghaf during the early stages are in a fantastic position, whether they want to resell or generate rental income.

Off-plan is a great option for real estate investors and can bring in fantastic Return on Investment (ROI) over time, but it’s essential to get good advice from a reliable broker and to be patient. Even in a fast-paced real estate market like Dubai, there are no shortcuts to investment success.