How do we choose the real estate developer?
- By admin
- June 30, 2019
‘How do we choose the right real estate developer and project to invest in if it is off plan?’ is a repeated question from potential investors. I suggest the following simple criteria to be followed:
1. Quality and reputation: Investors should not be tricked by awards won by developers or projects as many of these are commercial awards. Instead, the history of successful delivery of real estate projects of developers should be scrutinized. Going to Real Estate Regulatory Agency of Dubai (RERA) website under Project Status Tracking Service is the right way to do it. You can search all projects that are being constructed by developers and see which projects are making a progress and which are delayed. This usually gives you a hint about how serious the developer is: https://www.dubailand.gov.ae/English/services/Eservices/Pages/Project-Indicator.aspx
Visiting one of projects that were developed by the developer is must-do step. Go and check the building, the finishing, the way it is managed and talk to owners. Although projects can be different, this will tell you a lot about what to expect
2. Experience of a developer: Buying from new developers can be risky and that is why choosing a project from a well established developer is important. Looking at their Trade License, you can find the Year of Establishment. Taking a look at their portfolio of projects is important because it will shed some light on their experience in delivering large scale projects and whether or not these projects have any quality or technical issues.
3. Compliance : Developers before selling off plan tmust be registered at RERA. Check on RERA website if the a developer is approved. Projects also have to be registered at RERA and have a Trust Account before a developer can sell off plan. Double check that you are only depositing money at the approved Trust Account. If a developer asks you to deposit outside the Trust Account, report this to RERA immediately. RERA website has all approved projects and their Trust Account details. Developers need to have marketing approval before selling, which you need to check. If the developer is third party (not master developer), check that master developer does not have any legal issues or pending approvals with them.Some times issues may arise between master developers and third party developers, which may delay the project.
4. Financial capability of the developer: Although it is not easy to find such information, some developers are public listed, so you can access their financials from DFM. However, most of developers are not public listed. To avoid investing with developers who are not financially capable, look at their current portfolio of projects. Developers who do not have records of delivery and announce several projects most probably are overstecthed and will not have administration and financial capabilities to complete the project. Developers who give flexible payment plans, if they are not financially capable to deliver their projects, may not be able to finish projects on time. The reason for that is the cash flow issue. The moment investors stop paying , or default on their commitment, developers who do not have financial power will be stuck.
5. Good management team : A very good company will often have a good leadership. A good management team will have the necessary skills to deliver real estate projects. It will beneficial to look at leadership experience and their skills to make sure they are capable of leading and delivering even in worsy case scenarios.
My advice to all investors is to do their due diligence by conducting a proper search on the developer, the project and market performance( prices, rent, supply etc). It is important that you are not tricked with incentives and over promising. Understanding time, value of money and what it means to pay over long period is very important.