What are the options for prospective buyers!
Buying a property in Dubai is a dream for most. Apart from its ownership pride, there are significant cost benefit as with any other type of investments. We shall discuss today the most popular and affordable option to buy property in Dubai as an expat along with its pros and cons.
So with post COVID scenario, the developers have become more and more innovative in offering the products as more inventories are available compared to slightly less demand specially in apartments category. I would like to discuss the possible property ownership route here specially for the mid income expats who can purchase the property either to reside in it and avoid paying rent OR buying it purely for investment purposes.
The property on offer for such schemes are either ready to move in or will be available for delivery in few weeks or a month (AKA Post handover payment plan). The developer offers you a payment plan anywhere from 3 to 5 years (or even more sometimes) inflating the price to compensate the installment option they are offering.
For example if you go and buy a property for 310K AED on cash, the same developer will offer the same property for 345K AED on the installment of 4 years with a downpayment of lets say 20-50%. Lets talk about some pros and cons of this offer.
Benefits:
You will be able to afford the property without having to accumulate the full amount and can move in (in case you want to reside) right away in a brand new house and save on rent OR part of the investment is being paid by the tenant if you decide to rent it out.
The remaining amount can easily be paid up in next 4 years which offcourse will be much higher than the rent you might be paying for similar property, but the equity building is great and you will eventually become the owner within 4 years (or whatever the tenure agreed upon).
If you plan to go to bank to mortgage for such a property – this will include a lot of paper work and overhead that you have to bear and significant time is be consumed in process.
In case you already have some loan – or for some reason your profile is not eligible for a mortgage, you might not be able to get the financing from the bank straight away – and this route can be your best bet for becoming a landlord
If you are one of those people who hate paper work and prefer to pay little extra for convenience – this option will work best for you if the payment plan is according to your preference.
The property will be on your name in the land department and you can still sell the property if you wish to and the remaining payable amount will be transferred to new owner OR the owner can clear all outstanding dues. This is specially beneficial in case of price increase.
Last but not the least – you can possibly save on agent commission if you manage to find a good property direct from the developer – this will save you around 2% of the total property price.
Drawbacks:
Lets talk about some drawback of this route to become a landlord.
This type of offering from the developer in most of the cases is expensive than going to the bank – so if you are cost conscious, then you need to do your full due diligence in order to analyze the inflated price on installments.
While purchasing such property – the prospective buyer sometimes can go over board as he is not passing the strict filtration criteria from bank and the developer is happy to lend the support with only the agreed downpayment. So the buyer has to be responsible enough to understand the future payments that they need to pay.
The case of a default is mostly the same as what a mortgage default look like – but still, have a detailed look on terms and condition for that.
As you can see I cannot find a lot of drawbacks with the scheme – but the 2 points above are very important to note. One is about the price you are being offered for the property and secondly – and perhaps the most important of all is the responsibility at your end in judging if you really can pay back on time as the bank is not there to vet your position for purchase of the property. You have to consider all possible scenarios like losing the job, getting stuck with a bad tenant (in case of renting it out), etc.
To conclude, there are multiple options to buy property in Dubai – Whatever you do, but in these uncertain times, just make sure to complete all the due deligence and don’t over burden yourself. While living a rent free home is a dream target for many, but you always have to consider financing cost for owning a property along with service & maintenance charges as well as emergency sell off in case of relocation etc.
So whether you are buying property on mortgage, cash or on a payment plan – always make sure about the above factors as it becomes so much important while you are purchasing the property through developer’s payment plan.
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