Investing in a completed property or in an off-plan asset is a major decision and choosing what works best for you is primarily influenced by the purpose of the investment and the financial advantages it brings. 

The term off-plan property refers to unfinished projects or buildings that can be either newly launched projects with only a master plan or a project that is already in the works. Completed properties on the other hand, are as their name implies, ready; and while these can be moved into or rented out immediately after paperwork is completed, buying off-plan is a long-term process and could often be more rewarding.

Both types of assets have advantages and disadvantages that should be weighed against the investor's specific circumstances. So, what exactly are they?

• Competitive pricing/payment options: Off-plan properties are often priced below market value, allowing first-time buyers and experienced investors to benefit from lower prices and more flexible payment plans. For early investors, they typically expect to benefit from first release discounting and rising capital values, stimulated by both general market movement and from the developer’s increasing pricing in later phases of project maturity. Extended post completion payment plans, that may negate the need for mortgages, can also be a strong draw for some investors, especially those with limited cashflow. Another benefit is the ability to access developer incentives, such as no-agent fees or partial or full DLD (Dubai Land Department) developer contributions and service charge waivers as opposed to completed products which typically have a higher acquisition cost. Lower deposits make off-plan properties a more attractive option compared to the minimum 25% down payment required for a mortgaged property. Off-plan assets also have aggressive pre-completion payment plans that typically amount to 40-60% of the total sales price. These demanding payment schedules coexist with the need to meet existing rental or mortgage payments during the construction period for end-users. 

As for completed projects, up-front capital requirements are significantly lower and mortgages for first-time buyers typically require 20-25% of the purchase price in equity as well as the advantage of having established rental benchmarks as opposed to off-plan properties. 

• Ability to select units: When purchasing an off-plan property, you have access to the entire property plan, giving you the best chance of getting the exact unit type you desire. However, in the case of ready-made properties, most highly in demand units would have already been sold to eager investors, and so, chances of finding prime units in a new project at a lower price are diminished.
• Customisation: Some high-end projects allow you to customise off-plan property based on your personal needs and requirements, and in effect allowing you to express your individual style. In the case of a finished product, the investor has the option of refurbishing it. However, depending on the age and/or original specification of the property, one disadvantage of the finished product could be dated finishes.
• Property value appreciation: Despite fluctuating market prices, the real estate market is on the rise, giving the opportunity to flip – in simpler words – re-sell the off-plan asset during pre-completion and secure capital appreciation. Also, as the off-plan development begins, and the surrounding areas' transportation, amenities, and retail infrastructure improves, the value of the property rises.  Profit will grow as market prices rise because the purchase was made at a lower price, enabling the buyer to sell the property at a profit.
• Buyer protection: Typically, buyers make payments to approved banks which are then verified by a property consultant. RERA, the regulatory arm of the DLD for example, have enacted legislation to protect off-plan property buyers by requiring developers to deposit all payments in a registered escrow account, which can only be accessed once the project has reached a certain stage of maturity. However, in some cases, the risk of developer non-performance, delays or delivering quality that falls short of expectations remain a hindrance. Buyers in markets such as the UAE are protected against delays, cancellations, and fraud. There is also competition for tenants in projects with a high number of handovers, and project launches are frequently opaque and frustrating, especially when it comes to misleading availability lists. For completed projects on the other hand, the attributes of a specific property (location, quality of finish and adjoining uses) are clearly known.  

In both cases, your due diligence is crucial. Before making a final decision, consider the time it will take you to receive the property, the availability of funds, your preferred location, the profitability and the developer's reputation and quality of other completed projects. Choose the option that best meets your current needs, but most importantly, make certain that the property you intend to buy will be built by a reliable property developer.

This article is written by HP Aengaar, CEO at Asteco.