The journey towards home ownership is no walk in the park. There are twists and turns along the way and only a few lucky ones actualize this dream. The first and biggest challenge is always raising the required amount to either buy a ready built unit or buying land and building a house suited to your taste.
Buying a house is more expensive than building one. Some prospective home owners might not have the full amount upfront but are able to get it in installments. Building becomes a more viable option for them. However, running around chasing after fundis might not be their cup of tea. This is the niche that off plan housing intends to fill.
Like the name suggests, off plan property investment is buying a property still on plan or at design stage, meaning not yet constructed. The buyer pays for it in installments.
The developer sells an investor the design to a home before it is built, often at a discount. The developer then uses the upfront payment to complete construction of the property, thus is able to secure financing for the project.
The off-plan property is deemed attractive if there is a high level of infrastructure in the immediate area e.g a new university or express roads, either already built or due to be built within the next few years. In a rapidly rising real estate economics housing market, buying off-plan enables investors and home buyers to buy a property at a lower price than if they wait for construction of their chosen property to commence. In addition, buying off-plan may be the only way to get a property with a specific location or set of features as choice may be limited once construction starts.
Buying a property off-plan, whether to use as a home or as an investment, incurs more risks than buying a property that has already been built.
The developer may go out of business before construction of the property is completed and the buyer may not be able to recover the monies advanced. This the plight of investors who paid huge sums of money to Banda Homes and Suraya Properties and whose stories have made headlines in the recent past. The investors complained of making payments but not seeing any considerable progress in construction of their homes.
There has been suggestions to introduce regulations to strengthen off plan property purchase sector, that will weed out phony developers. In 2016, Dubai introduced a regulation that require developers and brokers to get approval from Dubai’s Real Estate Regulatory Authority (RERA) before they advertise property in the media. The new regulation was aimed at cracking down on fake property ads, protecting both buyers and genuine developers.
They further strengthened the property industry by introducing a regulation that requires a development to first attain 50 per cent completion before they can begin off-plan sales.
In the absence of such regulations, would-be home owners are expected to carry out due diligence before engaging the developers. This could be in the form of viewing past completed projects and speaking to former clients. They can also insist that payments are made based on milestones achieved in the project.
Lastly, the investor can request that the new-build property developments is backed by bank guarantees that protects the buyer from a builder going bankrupt.