Buying off-plan property is a new trend that is becoming immensely popular in recent years, especially in the UAE housing market where off-plan properties have gradually taken the forefront. However, going through with a property purchase deal – from market research to finally signing the contract document – is not an easy undertaking. In fact, it can turn out to be an explosive minefield if you are new and inexperienced in this type of business.
Like other property dealings, off-plan property transactions also have room for negotiations. And, your negotiating position will be determined by certain factors. Let’s take a closer look at different scenarios of positions of negotiations with developers while buying off the plan:
Sealing an Early Deal Increases your Bargaining Power
Being among the first batch of buyers in a project is important if you want to obtain a bargain. The earlier you can seal a deal of an off-plan property for sale, the greater the chance of obtaining a better unit and a good discount on the purchase price. This is because developers are more concerned about jumpstarting the sale of a project at its beginning which may be advantageous to you by increasing your bargaining power.
Purchasing Late but Not Too Late
Some developers choose not to give discounts or special offers when a project sales venue is launched as early bird discounts may reflect negatively on the company and affect its sales outcome. Nevertheless, most developers may be keen to strike a deal when a project is nearly sold out, so they can get the bank approval to start the construction work. Therefore, it is very much a possibility to negotiate a discount on unsold units of a nearly completed project.
However a word of caution, in the case of huge projects, developers often release them in stages. So, prices may go up if the first round of units sells well.
Targeting Less Successful Developments
Developers will be more open to negotiating prices if the sales campaign performance of the project falls below their expectation. In order to secure finance and jumpstart construction, developers need to meet a ‘pre-sales’ goal, which amounts to normally 60%-70% of the entire project. This added pressure opens up a negotiating opportunity for buyers.
However, you should be careful in such dealings because a project is less likely to see the light of day if sales go pretty bad.
Looking for Less Prime Location Projects
If a project is located in a less than prime location then the lower the demand for that project; the greater the opportunity you have of knocking the price down. Not all the properties are built in prime locations of a city. So, if you have done your homework, you may find a development that is not in a prime location, yet still fulfills most of your requirements. With these projects you have a good chance of negotiation.
Doing the Homework
Developers will always say that their project is in demand but do not take their words for granted. Do your own research of prices in the same area and try to estimate how much it will cost to build the proposed apartment (consult a professional if needed to get the estimation done). Plus, find out what other units in the project have sold for. Use all the information you can find to help you increase your bargaining power in your negotiations and make an offer that you deem reasonable
A successful negotiation depends on doing proper groundwork, coming up with a good strategy and having the guts to stick to it. You should know what you want and not be afraid of walking away. Do not show that you are sold on; rather let the developer chase you!
The Condition of Off Plan Housing Market in the UAE
The current housing market in the UAE is very lucrative for the off-plan buyers as developers are keen to sell the off-plan properties with payment plans that require smaller upfront deposits. The situation is inclusive of Dubai where off-plan properties are cheaper than secondary market.
In such a rewarding market, buyers can easily strike a good deal on off-plan properties by making the deposit of 10% of the total purchase price and paying the remaining payments according to the payment schedules agreed on. You do not have to make any extra payments unless the purchase agreement states otherwise. The purchase contract made between the developer and the buyer is legally binding. So, finalize the contract only after all agreements and terms have been settled.