The real estate market in Dubai is growing rapidly. Developers are coming up with new projects to attract customers. The rising demand has also consequently raised property prices. This market trend is making it difficult for people to afford investment in real estate, a major reason behind the increased investment in off plan property.
Off plan property is one in which no structure has been constructed yet. It is comparatively much cheaper than its ready counterpart and gives the option of paying in installments. Even when the city is witnessing a slow rise in the sale of property, off plan projects are in great demand.
There have been speculations of a temporary crash imminent in the Dubai market. This short-term fall in the market rates to stabilize a rising trend is known as market correction. Low income, government regulations and overpriced properties are some of the reasons that may lead to such a correction. It will create an impact on the off plan property market.
When the prices in the market will drop, the rush from off-plan projects will be diverted towards ready properties. People invest in off plan projects only because ready homes are more expensive. Besides, some of the risks involved in purchasing off-plan property are:
Fall in prices- If the property market falls in the duration that your project takes to get completed, you may not be able to get good returns on your investment.
Different interpretations –The developer may have shown the investor a design plan. The latter may interpret it in one way while the property may turn out different when ready. One can never be completely certain what the property will look like without seeing it physically.
Increase in interest rates- The interest rate on off-plan property tends to rise with time and becomes a burden on the buyer.
Cancellation of the project – There is always a risk of the project getting cancelled due to shortage of funds or other reasons. This could result in loss of both money and time for the investor.
Thus, buyers tend to avoid off plan property when the market undergoes a correction. As the fall in price will remain for a short period only, they will want to make the most of the situation and get the best ready homes for themselves. After all, a ready-to-move-in home or office is always the first choice for a buyer.