What a distress deal is in Dubai or how an investor can make money on a crisis

Distress deal in Dubai means a transaction in which a property owner is forced to urgently sell the property for a price much lower than the market value. Usually such offers are due to money problems such as inability to pay installments anymore. Therefore, the main purpose of such deal for the owner is to get the money as quickly as possible.

For investors, a distress deal becomes a good opportunity to buy property in Dubai at a lower price.

Main reasons of a distress deal

Generally, all the reasons for such transactions are cash related. Firing the owner from a good position, relocation, bankruptcy, etc. A broker needs to have a perfect understanding of the Dubai property market so that his client does not face a distress deal as a result of an unsuccessful purchase.

Of course, the UAE has a reliable market, but even here you can meet with "non-liquid". Even the most premium projects are not always suitable for resale. Therefore, it is necessary to look for a property for investment with a cold mind and do not fall for the "hype". First of all, study analytics, compare similar properties, communicate with other brokers and developers, etc.

What happens if you don't pay the installments

In Dubai, if a client defaults on installment payments for a long time, the only option to recover their money is to sell the property to a new buyer. The developer does not refund the amounts previously paid and imposes fines for each delay, and in case of regular non-payment can terminate the contract.

Why distress deals have become a trend

Between 2021 and 2022, the Dubai market saw a ‘boom’ of property buyers from CIS countries. Many clients at that time purchased apartments in new buildings with the possibility of instalments and payment plan until 2026-2027. At that time the dollar exchange rate was approximately 60-65 roubles.

However, the exchange rate has now risen to 100 roubles, which has led to an increase in the price of apartments by tens of millions. For those who paid instalments in dollars, nothing has changed. But those who transferred rubles more and more often refuse to pay and try to get rid of the property as quickly as possible. Moreover, transfers from Russia have become quite complicated due to the imposed sanctions (we wrote more about how to transfer money from Russia to Dubai here).

Distress deal or marketing

Situation 1. Let’s assume that the property was bought for 800 000 AED, but is sold for 700 000 AED. This is a distress deal and will definitely benefit the investor.

Situation 2. Apartment was bought for 800 000 AED, but soon the owner thought that its market value was 1 000 000 AED and decided to sell the property for 900 000 AED. This is not a crisis transaction, but a marketing move.

How to check the real price of the apartment

The most direct and easiest way 一 ask the owner of the apartment for the purchase documents. If the owner for some reason refuses to do this, you should be cautious. There is a possibility that they are trying to sell you a non-liquid property.

Conclusion

Remember that a distress deal is profitable only for one of the parties. Advice that a broker should give to his clients: do not buy property in Dubai, if you are not sure of your financial solvency. Do not enter the project for the last money and hope for luck. However, if there is an inability to continue to pay by installments, a distress deal is the best solution on the Dubai market.