By Ghada “GG” Benitez
The questions international property buyers, including Americans, should ask about developers, escrow, costs, rental demand, management and exit strategy before reserving a unit.
Dubai’s off-plan property market gives international investors access to new communities, waterfront developments, flexible payment schedules and properties that may not be completed for several years. However, an attractive brochure, payment plan or projected rental return should never be the sole basis for an investment decision. When I advise American and global investors, I begin with the investor, not the property. Before looking at developments, we establish the buyer’s financial objective, preferred holding period, risk tolerance and plans for the property. Is the objective rental income, long-term appreciation, personal use, residency eligibility or a possible resale before handover? A property that works for one objective may be entirely wrong for another. Here are the questions global investors should ask before purchasing an off-plan property in Dubai.
1. Who is the developer?
The developer is one of the most important parts of an off-plan investment. Investors should examine the developer’s delivery history, financial strength, construction quality and reputation after handover. They should also study completed projects, not only current launches. Pricing strategy matters as well. If a developer continually launches similar properties at discounted prices, existing owners may find themselves competing against the developer when they want to resell. A financially strong developer with a disciplined pricing strategy may be better positioned to protect the development’s long-term value. The master developer and surrounding community plan are equally important. Transportation, schools, retail, hospitality, public spaces and future infrastructure can influence both rental demand and resale value.
2. Is the project registered and are payments going into the correct escrow account?
Dubai has developed a regulatory system for off-plan property sales, but buyers must still verify each transaction. Dubai Land Department states that developers selling off-plan units and receiving money from purchasers are required to operate through the applicable escrow-account framework. Investors should confirm the project’s registration and project-specific escrow account before transferring funds. An investor should never assume that a company’s general bank account is the appropriate place for an off-plan payment. The payment instructions should correspond with the registered project documentation. Dubai REST, the official Dubai Land Department application, also allows users to access information about off-plan projects, including construction progress and escrow details. Regulation provides an important layer of protection, but it does not replace due diligence.
3. What is the complete cost of the investment?
The advertised price is only the beginning. Investors should calculate applicable Dubai Land Department registration charges, administration fees, trustee or conveyancing costs, mortgage expenses, service charges, furnishing, maintenance, property management and potential vacancy. A projected gross rental yield does not represent the amount an investor will ultimately retain. Net yield should be calculated after realistic operating expenses. Investors should also understand the payment schedule. Some developers offer interest-free construction-linked or date-based instalment plans, but these plans are not the same as a mortgage. Buyers need sufficient liquidity to meet every contractual payment, particularly the final payment at handover.
4. Is the projected rental return supported by evidence?
Rental projections should be tested against comparable properties, current rents and anticipated future supply.
Investors should ask who the likely tenant will be, why that tenant would select the development and how many competing units may be delivered at approximately the same time. Short-term and long-term rentals are different operating models. Short-term rentals may produce higher gross revenue in certain locations, but they can also involve furnishing, utilities, platform charges, tourism requirements, management fees, seasonal occupancy and more active operations. The most impressive projected return is not necessarily the most reliable return.
5. What will happen at handover?
Handover should be considered before the property is purchased, not when construction is almost finished. Investors should decide whether they intend to pay the remaining balance in cash, seek financing, occupy the property, place it into a long-term lease or operate it as a holiday home where permitted. Mortgage availability, valuation and eligibility at handover cannot be guaranteed years in advance. Buyers planning to finance the final payment should maintain a backup strategy. Remote owners should also determine who will inspect and snag the property, arrange furnishing, receive keys, secure a tenant and manage maintenance after completion.
6. What is the exit strategy?
Every property investment should have an exit strategy, even if the investor plans to hold it for many years. For an off-plan property, investors should understand whether the developer permits resale before handover, how much of the purchase price must be paid before a resale can occur and whether a no-objection certificate is required. They should also consider who the future buyer is likely to be. Is the property designed primarily for investors, residents, families, executives or holiday-home users? Will the owner be competing with unsold developer inventory or a large number of similar units? An investment should be evaluated not only by how easy it is to purchase, but by how it may eventually be sold.
7. What should American investors understand?
Americans can purchase freehold property in designated areas of Dubai, including while living outside the UAE. The UAE does not impose an annual property tax comparable to the recurring property taxes charged in many American jurisdictions. The UAE dirham is also pegged to the US dollar, which provides American buyers with a degree of currency stability. However, Americans should not interpret Dubai’s local tax environment as meaning their investment is automatically “tax-free.” The Internal Revenue Service generally requires US citizens and resident aliens to report worldwide income. Rental income, capital gains, ownership structure and foreign financial accounts should be reviewed with a qualified US international tax professional. The right team may include a RERA-licensed Dubai broker, mortgage advisor, property manager, conveyancing professional and tax or legal advisor familiar with the investor’s home country. The strongest Dubai investment is rarely the property with the most impressive brochure. It is the one supported by the right developer, realistic demand, a complete cost analysis, a management plan and a clear exit strategy.
AUTHOR BIOGRAPHY
Ghada “GG” Benitez is an American real estate advisor licensed in both California and Dubai. She is a California Licensed REALTOR®, DRE 01487964, Dubai RERA Licensed Real Estate Broker, BRN 83445, and Certified International Property Specialist, CIPS®. Benitez serves as Associate Director of U.S. & Global Markets at Prime Capital Realty, is CEO of GG Benitez International and hosts The Dubai Connect® Podcast. Working between San Diego and Dubai, she advises American and global investors on cross-border real estate investment, off-plan property, developer due diligence, property management planning and exit strategy.