Guide
Off-plan and payment plans
An off-plan purchase is paid for in instalments and earns nothing until the keys are handed over. The sums are different from a finished flat’s.
Reviewed
Each term is defined in the glossary. All guides.
What off-plan means
An off-plan property is bought from a developer before it is finished. You sign a contract for a home that does not exist yet, and you pay for it in stages.
Two things follow. The money goes out over months or years, and no rent comes in until handover.
The payment plan
The contract sets out a payment plan: a sum on booking, instalments while the building goes up, and a balance at handover. Some plans leave part of the price to be paid after handover.
An instalment may fall on a date or on a stage of construction. Ask which, because a stage can arrive early or late.
A report sets the plan out as a schedule: each instalment and the day it falls due. Set it against the cash you will have on each of those days.
Oqood and the fee
In Dubai an off-plan sale is entered in Oqood, the Land Department’s register of off-plan sales. It stays there until the property is finished and a title deed can be issued.
The department’s fee for registering the sale is 4% of the price, listed as 2% from the seller and 2% from the buyer. Read the contract to see who pays.
Source: Dubai Land Department, service fees for registering an initial sale, read .
Borrowing against off-plan
The Central Bank of the UAE allows a bank to lend at most 50% of the value of an off-plan property, whoever the buyer is. The other half is yours to find.
Source: Central Bank of the UAE, Regulations Regarding Mortgage Loans, read .
On a finished property under AED 5,000,000 the limit for an expatriate’s first mortgaged property is 80%. Plan for the difference. How much a bank may lend has every row.
No rent until handover
A finished flat can be let soon after the transfer. An off-plan flat earns nothing until handover, while the instalments are being paid.
So the yield on an off-plan purchase is a yield at handover, on a rent nobody has agreed yet. Today’s asking rents in the area are a guide and no more: they are asking figures, for buildings that already stand.
Handover can be late. Work the plan with a later date and see whether you could still pay.
We do not forecast what the property will be worth on the day it is handed over.
What to check
- That the project is registered with the Land Department, and who holds its escrow account. Dubai publishes its project register through Data Dubai.
- How far the building has got. The register gives a percentage complete, and the published figure can run some months behind.
- What the contract says about a late handover.
- Who pays the registration fee.
- The service charge. A building that is not finished has no filed budget, so any figure for it is an estimate.
An escrow account holds buyers’ payments for a project apart from the developer’s own money.