How to Find Best ROI for Off Plan Property in Dubai
Thinking about jumping into the world of off plan property in Dubai? Q1 2024 brought some exciting highlights: Off plan property accounted for 58% of total properties sales with an average off plan rental yield of 7.3% in Dubai. Some newer projects are promising up to 10% ROI.
Off plan property in Dubai is undeniably a hot market, but it has its unique set of advantages and challenges. How exactly do you find the high off plan rental yield while steering clear of potential pitfalls? We’ll walk you through the steps to pinpoint the top off plan rental yield opportunities, while also highlighting red flags to avoid.
Is it Risky to Buy Off Plan Property in Dubai?
Like any investment, there are pros and cons to weigh before diving in. Let’s start with the benefits and risks of buying an off plan in Dubai versus to buying from the resale market.
Off Plan Property – Advantages
| 1. Price Discounts | – Some waive 4% DLD and/or 2% agent commission – Ongoing promotions |
| 2. First Choice on Unit | – Variety of options, floor plans (esp. after launch) |
| 3. Small Down Payment | – 5% -10% – Gives more time to get finances in order |
| 4. Flexible Payment Terms | – Some offer Post Payment Plans (2-5 years after completion) – Payment plans depending on developer (10:90, 20:80, 30:70, 40:60, 30:70) |
| 5. High ROI | – Capital appreciation – Off plan rental yield for Investors |
| 6. Brand New | – Modern, smart homes – Less fixes and maintenance – Some offer 1-year warranty on repairs and maintenance |
Off Plan Property – Disadvantages
| 1. Risk of Delays | – Uncertainty of completion – Paying more rent while waiting for completion |
| 2. Risk of Bankruptcy | – Risk of cancellations – Developer might go bankrupt or fail to complete the development properly |
| 3. Waiting Time | – Waiting for the entire development and amenities to finish – No immediate ROI – Investors can’t move in or rent it out immediately – Can affect rental potential |
| 4. Nothing Tangible | – Buying based purely on brochures, photos, and videos – Sub-par quality – Amendments to floor plans, finishes & fixtures |
| 5. Market fluctuations | – Slow location growth – Market appreciate not guarantee – Pool of buyers may want to sell reaching completion to make a profit or because they cannot settle the payment, leading to oversupply |
| 6. Oversupply | – Can lead to fall in property value – High level of competition between investors for tenants |
How to Find Best ROI for Off Plan Property in Dubai
Truthfully, not all off plan property are created equal, and there are a few factors that can make a big difference in how good each one turns out.
Here are some tips to help you filter the winners from the losers:
1. Pick a Prime Spot
Start by scouting for properties in high-demand areas with strong rental markets. These properties should not only fit your financial plan but also have the potential for appreciation and rental income.
Check out “Where are Investors Buying Properties in Dubai”, we have included “The 5 Best Area to buy Off Plan” and “5 Best Area for Long Term Rental Return” along with other top picks for prime locations for property investments.
2. Research Developer’s Reputation
Stick with reputable developers known for delivering quality projects on time. A trusted developer can give you peace of mind and enhance the property’s rental appeal.
Below are the sales transactions for off-plan properties by leading developers in Dubai:
3. Spot the Perks
Properties with attractive amenities like pools, gyms, and parks tend to get you higher rents and off plan rental yield.
4. Analyze Payment Plans
Take a close look at the payment plans, and see how it aligns with your budget for these high-demand and trending areas.
And do your homework. Make sure to research and compare rental prices for ROI and cash flow.
We have put together a simple Rental Yield Calculator using Excel/Google Sheets. This calculators (below) include all the upfront and extra costs that come with buying a property in Dubai and the potential return on investment (ROI) of a given property.
- Rental Yield Calculator Dubai for long-term lease – Free
- Rental Yield Calculator for Airbnb / short-term lease – Free
5. Evaluate Market Trends
Keep an eye on what’s happening in the market. Areas with big developments or improvements with reputable developers are likely to see rental prices rise.
Again, check out “Where are Investors Buying Properties in Dubai” on where the up-and-coming communities are that could bring in big off plan rental yield down the line.
How to Reduce Risk When Buying Off Plan Property
There are a few things every investor needs to look before buying an off plan property.
1. Check Developer’s Track Record
Look into the developer’s history and see what kind of reputation they have. Have they finished past projects on time? Are those projects high quality?
Read reviews and feedback from previous buyers to get a sense of how reliable they are.
2. Review Sale Purchase Agreement (SPA) Thoroughly
The SPA is a really important document that lays out all the terms of your purchase. Make sure you read it thoroughly to understand what you’re agreeing to.
Will you be compensated for any unexpected or unscheduled delays? Is the developer registered with DLD?
An escrow account is a government account that collects all investors’ funds to build that project. Is there an escrow account for funds to be transferred? Absence of escrow account is a red flag.
3. Payment Plan Too Tempting
Attractive payment plans can make an off-plan property look like a great deal, but be on the lookout for hidden costs.
4. Hire a Property Lawyer to Review the SPA
They can spot any unclear or unfavorable terms that could be risky for you. They can also negotiate better terms and make sure the contract protects you.
5. Learn from Facebook and Reddit Discussions
This is seriously helpful.
Check out discussions on Facebook and Reddit forums to get tips and advice on developers and other investors’ experiences. They have been through it, and can help you avoid common mistakes and make a better decision.
How People Really Feel About Off Plan Property on Reddit
While researching for this post, we dove into countless discussions on Reddit and Facebook to see how people really feel about investing in off-plan properties in Dubai.
Many voiced their frustrations about huge delays and broken promises, but a few did share success stories about their returns on investment.
Here’s what we found…
Let’s take a look…
“I bought a finished apartment and an off-plan one. The off-plan one is already at 60% returns.”
“Bought an off-plan villa with Emaar in 2019, was supposed to receive it this September but it was delayed till 2024… This puts a big dent to my plans and finances, as I will have to continue renting for two more years.When I tried to argue with them, they said that they’re within the contract details, because it mentions only the estimated handover date, and not the designated date… Should I just wait? Take it to court? Ask them for a replacement villa instead? If anyone can help, please lmk.”
“I bought off plan in January 2022. The property was supposed to be ready in March but wasn’t available till October 1st. There were loads of problems with getting bad information from the agent, different floor, different layout, confusion around payment schedule, a long snagging list. I was ready to sue them in the summer and take a big loss.The property has however now been handed over and in value risen from 1.8 million to 2.3/2.4 so potentially a 30% rise in less than a year since moving from off plan to complete. So for me, it was a stressful experience and the agents in particular lied about everything. Financially though it has worked out well.”
So, is it Good to Buy Off Plan Property in Dubai?
The reality is, off-plans in Dubai are not slowing down. These picture-perfected projects are marketed every day, and there will always be complaints on investors’ horrific experiences with the developers.
Off-plan properties is an attractive investment because investors often benefit from initial appreciation by getting in during the early construction phase.
But there are always trade-offs to cheaper off-plan prices, and each investor will have their unique financial situation and risk susceptibility.
If you can take on the risk, the long waiting period and the hassle of unexpected surprises, the off plan rental yield and capital appreciation on the right development may be worthwhile.
What’s your experience with off plan property in Dubai ? Did you make a killing or still have buyer’s regret? Share with us below!
Next: Which One Do You Pick? Ready Made or Off Plan Properties in Dubai
