Legal Risks of Buying Off-Plan Property in Dubai

In case you intend to buy an off-plan property in Dubai, it’s essential to have realistic expectations.  

Buying off-plan properties in Dubai undoubtedly brings great benefits, but it also comes with some risks. 

So, you may be wondering and even asking yourself… What does it really mean to buy off-plan property in Dubai? 

Well, to make a long story short, it simply means you’re agreeing to purchase an apartment or villa before it’s finished (completely built).  

This is done based on plans, images, and a detailed contract. The developer will present a prototype of how the building will look like when it is finished, and based on the prototype, buyers commit their money to the developer and the property will be given over at a later time, usually between 1 to 4 years. People usually book early, which often means they get a lower ticket price.  

Buying off-plan property in Dubai usually goes like this: first, you make a reservation deposit, then you sign a contract, followed by a payment plan with installments.  

After that, you wait for the property to be completed, and finally, you go through the handover and registration process. 

Buying off-plan is a very common practice in Dubai. It lets buyers get in early, often secure a good price, and enjoy flexible payment options. However, they need patience, and you have to trust the developer, the market, and the timeline.  

Why Do Buyers Choose Off-Plan Properties? 

Despite the risks involved in buying something you cannot see yet, there are still many people who would rather still go for that.  

Let us begin with the positive side as to why many buyers in Dubai prefer off-plan properties. 

• Lower initial cost:  

• Flexible payment options:  

• Possibility of increasing value: 

• Contemporary designs, fresh communities, and upgraded features:  

Important Risks to Be Aware of While Buying Off-Plan Property 

Here are a few most important legal risks while buying off-plan property in Dubai to be aware of: 

Delays in the Project and Uncertainty in Handover 

One major risk when buying an off-plan property in Dubai is that the handover date might be delayed.  

This delay could be due to issues in the supply chain, waiting for regulatory approvals, financial troubles faced by the developer, or any other unforeseen circumstances.  

Changes in Market Prices 

Since you’re purchasing before the project is finished, you might face changes in the market. The price you pay now might not seem like a good deal if the market isn’t growing or is going down. 

For instance, you agree on a price today, but when the unit is ready in 2-3 years, prices could either rise (which is good) or fall (which is bad). If things go poorly, your investment might take a hit.  

Risks Related to Developer Reliability and Quality 

When you purchase off-plan property in Dubai, you depend on the developer to provide what they promised, on schedule, and with good quality. However, not every developer executes everything flawlessly.  

The project might get canceled by the Dubai Land Department (DLD), the finishes could be of lower quality than what was shown in the brochure, amenities might be delayed or changed, or there could be unexpected extra costs. 

Challenges with Liquidity and Exit Strategies 

Simply buying an off-plan property isn’t the end yet; it is just the first step. In most cases, you will have to wait for some time before reselling it or fulfilling other obligations, which might take some time.  

This can mean waiting for some years, and there might be rules about selling it before it is officially handed over to you.  

If your plans change, money can get stuck. If you thought about quick flipping, that might not work out well. 

Not Earning Money Right Away 

If you’re looking to earn rental income right after buying, off-plan properties might not be the best choice. 

Excess Supply and Risk of Choosing the Wrong Location 

In some places, there might be too many similar units available, which could lead to lower prices or rental returns. If you invest in an area where demand is low, your investment might not do well. 

If the promised infrastructure or amenities aren’t provided, or if the area develops unexpectedly, it can create risks for your purchase. 

Challenges with Contracts and Payment Plans 

Off-plan contracts usually have payment schedules, penalties for delays or missed payments, and might have rules about reselling. If you don’t meet a milestone, you might lose your deposit or contract, or even the property. 

Differences in Quality / Final Product Variations 

Marketing might show an ideal picture, but the final handover could vary in terms of materials, layout, finishes, views, or amenities. 

If you’re looking for an off-plan villa in Dubai with high-end finishes shown in pictures, it’s of prime importance to cross-check and confirm with the developer that the actual finished product will be the same as that shown on paper. 

Which Is Better: Buying Off-Plan or a Ready Property? 

You might be wondering: “Is it better to buy off-plan property in Dubai or to go for a ready property?”  

The straightforward answer is that it relies on what you want to achieve, how long you plan to invest, and how much risk you’re willing to take. If your main focus is on growing your capital and holding it for the long term, or if you don’t need to move in right away or earn rental income, and you’re okay with waiting for a few years for the handover, buying off-plan can be a great deal.  

You get to enjoy lower starting prices and the chance for value to increase. In that situation, going off-plan might be a better choice. 

If you’re looking to move in quickly or start earning rental income right away, a ready property (secondary property) is the best choice. 

Buying off-plan properties in Dubai comes with significant discounts compared to ready homes to make the wait worthwhile.  

If the price for off-plan properties is the same as or more than that of available stock, the risk increases. 

Important Questions to Consider Before Buying Off-Plan Properties 

• Who developed it? What is his record? Deliveries, quality, and cancellations 

• Is the project registered with RERA, and does it have an escrow account? 

• What are the options for payment? What is the initial payment, and what are the key milestones in the schedule? 

• What will happen if there’s a hold-up? In case of delays, will there be any penalties or compensation involved? 

• Is it possible to resell before the handover? Are there any limits? 

• What are the service charges and maintenance fees? 

• Where is it located, what kind of infrastructure is there, and what does the future supply look like? 

• What happens if I decide to change my mind? Can I cancel or get a refund of the money I paid? 

• Are the floor plans and finishes confirmed, or might they be changed later on without my knowledge?  

Risk Mitigation Strategies for Buying Off-Plan Property in Dubai

Like any investment, off-plan investments come with both benefits and risks, and knowing how to manage the risks involved is what will make you secure a good deal.  

Here are some simple steps to help minimize the risks involved in off-plan investments:  

Choose a very reliable and reputable developer with a tangible track record of success in past projects. 

Make sure that the money is kept in an escrow account and that the project is registered with RERA.  

• Look at the entry price and compare it to similar units that are ready to move in; you should expect a discount. 

• Know your schedule and if you can hold off until the handover. 

• Request the most recent update on developer progress and the timeline. 

• Set aside money for additional expenses like furniture, upkeep, and service fees. 

• Keep an eye on market trends and the supply situation in that area. 

• Take your time to read the contract thoroughly; don’t hesitate to ask a lawyer for help if you need it. 

• Check out the project when it’s almost done and take a look at everything. 

A Guide to Buying Off-Plan Property in Dubai 

• Select your preferred Property: Look through off-plan properties for sale in Dubai. You can get a lot of good off-plan deals on MetaHomes, a renowned real estate property portal in UAE. 

• Pay a deposit (usually 10 to 20%) to reserve the unit. 

• Sign the Sales & Purchase Agreement (SPA) and pay the booking fee. 

• At this stage, it is also very important to take a good look at the payment plan and keep track of the due dates. 

• Keep track of progress: stay connected with the developer and check for updates on the construction. 

• Handover: when the project is finished, make the final payment, and then register the property with the Dubai Land Department (DLD). Once that is done the property be fully yours. 

After you register, you can either rent out or sell your property, keeping in mind any resale rules that may apply. 

Is it Worth Buying Off-Plan Property in Dubai? 

In brief, I’d say ‘yes’. Buying off-plan property in Dubai can be a smart choice as compared to buying a ready-to- move property, but only if it fits your priorities.  

If you want to own something for a long time, and are okay with being patient, and care about getting good value, buying off-plan can be beneficial. 

If you need to move in right away, earn rental income, or want to reduce risk, buying a property that’s already ready could be the better choice. 

When it’s better to go off-plan: 

• You’re looking for a lower starting cost and a longer time frame. 

• You are okay with waiting until the handover. 

• You are purchasing from a trusted developer in a great area 

When buying off-plan can be more risky: 

• You need rental income right away 

• You’re paying about the same price as a finished property. 

By doing thorough research, being careful, and having a clear timeline for your investments, you can improve your chances of success. Buying off-plan can be a good option, but you need to approach it with the diligence it deserves. 

What is meant by “off-plan property” in Dubai? 

A property in Dubai that is off-plan means it is still being built or hasn’t started construction yet.  

Buyers buy straight from the developer using the architectural plans, layouts, and future details.  

It lets investors purchase at a lower price and make payments in parts until the project is finished. 

Is it safe to purchase property that is still under construction in Dubai? 

Yes, it’s usually safe to buy from a RERA-approved developer and to make payments using an escrow account.  

The property market in Dubai is tightly controlled, with organizations like the Dubai Land Department (DLD) and the Real Estate Regulatory Agency (RERA) working to keep things clear and open. 

But, safety also relies on how trustworthy the developer is and how much research you do, always look into their history and registration before making a commitment. 

What are the key risks of purchasing off-plan properties in Dubai? 

The key risks are: 

• Delays in construction or cancellation of projects. 

• Modifications in property layout or dimensions. 

• Changes in the market might decrease property value over time. 

• Developer bankruptcy in uncommon situations. 

You can reduce these risks by selecting trustworthy developers and ensuring that your payments are made into an escrow account approved by RERA. 

What is the payment plan for off-plan properties? 

In Dubai, developers provide flexible payment options, usually requiring a down payment of 10–20%, with the remaining amount paid as construction progresses. Some also offer plans that let buyers pay a portion of the price after they move in. 

Make sure to check the payment plan, overall price, and delivery date before you sign the agreement. 

Are foreigners allowed to purchase off-plan property in Dubai? 

Definitely. People who live outside the country and expatriates can easily purchase off-plan properties in specific freehold areas of Dubai, including Downtown Dubai, Dubai Marina, Jumeirah Village Circle (JVC), Meydan, and Dubai Hills Estate. Ownership rights are complete and safeguarded by the law. 

Is it possible to get a mortgage for a property that is still being built in Dubai? 

Yes, certain banks provide off-plan mortgages, but this is only for projects that are RERA-approved and developers who meet the qualifications. The bank usually provides funds in parts as the construction moves forward. 

Typically, buyers are required to pay around 20–25% upfront. Your eligibility will depend on factors like your income, credit score, and the bank’s partnership with the developer. 

What will occur if the developer puts off the project? 

If the developer takes longer than the agreed time to finish construction, RERA can step in. Buyers might be eligible for compensation or a refund, depending on the type of delay and how the project is moving along. Make sure to review the delay clause in your Sales and Purchase Agreement (SPA). 

Is it possible to sell my off-plan property before it’s finished? 

Yes, but this typically happens only after a certain portion of the property price has been paid, usually around 30% to 40%, based on the developer’s policy and RERA’s guidelines.  

Some buyers take advantage of this to earn money if property prices go up while the construction is happening. 

But keep in mind that not all developers permit early re-sales, so it’s important to review the contract first. 

What are the key advantages of purchasing off-plan property in Dubai? 

The main advantages are: 

• Prices are lower than those of ready properties. 

• Easy payment options. 

• Possible increase in value by the time of transfer. 

• Enjoy modern designs, great amenities, and fresh communities. 

It’s a budget-friendly option for getting into Dubai’s real estate scene, particularly for those buying for the first time. 

What costs should I anticipate when purchasing a property that is still in development? 

Besides the property price, buyers need to plan for: 

• 4% registration fee for the Dubai Land Department (DLD) 

• The registration fee for Oqood is approximately AED 3,000. 

• Commission for real estate agents (typically 2%) 

• Charges for admin or services may vary based on the project 

Some developers might add registration or Oqood fees in their special promotions, so it’s a good idea to ask about it before you sign anything. 

What should I consider when reviewing an off-plan contract? 

Ensure your contract has: 

• Date of delivery and consequences for being late. 

• Payment stages and overall expense. 

• Size of the property, materials used for finishing, and specifications. 

• Terms for cancellation or refunds. 

• Information about the escrow account. 

It’s recommended to have a real estate lawyer look over your agreement to ensure everything is clear and to protect your interests. 

What’s better? buying a property that’s still under construction or a completed one? 

It really depends on what you want to achieve. 

• If you’re looking for lower starting costs, flexible payment options, and possible future benefits, going off-plan could be a better choice. 

• If you’re looking for quick rental income, reliable construction quality, and less risk, properties that are already finished are a better choice. 

Each option has its benefits, the important thing is to match your choice with your budget, how much risk you can handle, and your timeline. 

Are off-plan properties a good investment in Dubai? 

Yes, buying off-plan properties can lead to good returns on investment, especially when you choose trustworthy developers in desirable locations. The low starting price and possible rise in value once finished make them attractive to investors. 

Always take a close look at the location, the reputation of the developer, and the current market trends before making any investment. 

What will happen if the developer decides to cancel the project? 

If a project gets canceled, RERA makes sure that all the money paid into the escrow account is returned to buyers by the Dubai Land Department. This protection system helps keep buyers’ money safe from loss. 

What steps can I take to check if an off-plan project is real and trustworthy? 

You can check any off-plan project on the Dubai Land Department’s website or the DLD REST App.  

They have all the registered developers, escrow accounts, and project statuses available for you to see. This provides clear insight into the project’s legal status and how it’s progressing.