Off-plan disputes to hike completed property sales

However, off-plan buyers in Dubai have had little to complain about over the past few years.

Buyers in most areas have seen the value of their property double or treble during construction, often before they have even finished paying for it.

Indeed, for purchasers in several hundred different projects this has been a happy experience.

But not every project has been a success. Some have been cancelled and money handed back with interest. In one case a fraudulent developer absconded from the Dubai Marina leaving owners and the piling contractor penniless.

Most recently, Damac Properties cancelled a project on Palm Jebel Ali and offered owners their money back with interest or a 15% discount if they switched to another Damac project. That deal did not go down well with secondary market purchasers who were left with the choice of switching or losing money.

Caveat emptor

It is probably true that such cases will make buyers think twice before rushing to buy off-plan. For while the new escrow account system guarantees that funds will be used only for what they are intended, it does not guarantee that a developer will do a good job.

The most obvious point to consider when buying off-plan is location. Nakheel has reacted with surprise at Damac’s cancellation of its Palm Jebel Ali apartment scheme.

But then the revised infrastructure development programme on the Palm Jebel Ali means that building will not start until 2012, so Damac is perhaps just being realistic about delivery prospects.

One good rule of thumb for off-plan buyers is only to buy where construction has actually started. Then you will have a much better idea about your likely moving in date. Contractors do not like to hang around on site once they have started work.

Quality check

However, that will not help you much in terms of guaranteeing the quality of the final product. The reputation of the developer and contractor from previous jobs is probably the best guide but not infallible. Cutting corners to finish a job is nothing new, even the pyramids are filled internally with roughly cut stone.

Of course, off-plan buyers generally get a discount that goes some way to offset these risks. If this seems too risky then your only answer is to buy in the completed secondary market, but you pay a premium for being able to see what you are getting.

Dubai off-plan does not really have a bad reputation yet, as late delivery has been more than compensated by higher prices and quality is satisfactory or easily upgraded. But if buyers do become more wary of off-plan, the main beneficiary will be the market for completed homes in the secondary market, adding one more reason for prices to rise higher this year.