After the intervention of the Dubai Lands Department last week, the Palm Springs project
has been fully reinstated and is back on schedule, according to Damac.
However, there are a number of 'secrets' or major considerations when purchasing off-plan units in Dubai.
1. Who is the developer? How long has it been in business? How many projects has it launched and how many have been delivered? Have there been any complaints about the quality of these developments? Are these the sort of people you would trust with your money?
2. What sort of financial backing does the developer have? This is really linked to the first question but it is subtly different. In Dubai, the lowest risk comes with government-owned projects. Nakheel, Limitless and Dubai Properties are all 100% owned by the government, whereas the government has a large and effectively controlling stake in Emaar.
3. Also consider the price of units for sale from the point of view of construction costs. Do the units just look too cheap to allow the developer to finish the building? It sounds contrary to logic, but cheap off-plan should sound warning signals, as low-cost may mean low quality or even a failure to deliver if the developer gets into financial trouble.
4. In Dubai it has been compulsory since last July to have escrow or trust accounts for all off-plan projects. But check to see which bank is providing escrow facilities. Again a government-owned or controlled bank will have a higher credit rating.
5. If you are taking finance for your off-plan purchase you need to be particularly careful that the payments structure is fair and practical for your circumstances. You do not want to pay interest on a loan for a delayed project, for example, or at least to keep such exposure to a minimum.
6. The amount of risk you take in an off-plan purchase is also determined by the stage of the development. If work has not started on site, and all you can see is an architect's drawing and an illustration, then the risk of project delay is highest. If, on the other hand, you can see work-in-progress and a substantial amount of construction then delivery on schedule is far more likely. Many developers keep back some units for sale later in the construction cycle, but you will pay more for them.
7. Your current rental costs should be considered. Does buying off-plan mean that you are going to have to stay in expensive rental accommodation for a long time? If so you need to add up that cost, and consider whether moving to a completed property in the secondary market might not make more sense.
8. Location is the most important consideration when buying any property, but people sometimes seem forget this when buying off-plan. Check out the location personally, even if it is just a piece of desert! For there is a big difference between living in Downtown Dubai next to the Burj Dubai, the world's tallest structure, and out in the desert of Dubailand.See also:The pros and cons of buying off-planOff-plan speculators double their money in Abu DhabiOff-plan disputes to hike completed property sales