Dubai developers entice new buyers with favourable payment terms

Property developers in Dubai are offering potential buyers a range of incentives , such as flexible payment terms and buy-back options, as competition heats up in the emirate's booming property market. Dubai's property market rose to its highest level in nearly 10 years last year, with record sales figures in 2023 in an increasingly competitive sales market for developers and brokers. Last year set new records for value and volume of sales according to real estate broker Betterhomes, which said September saw average prices surpass the previous peak set in September 2014. A slew of new projects in recent months, however, has increased competition among developers and brokers in the emirate. Developers are increasingly exploring ways to connect with customers and offering attractive payment plans is one such option, Swapnil Pillai, associate director of research at Savills Middle East, said. "An attractive payment plan helps end users and investors with their investment decisions, as most of these payment plans have a limited upfront commitment, with most of the payments committed towards the handover of the development," he said. "Post-handover payment plans are also one of the options that developers have offered in the past. However, most of these incentives are usually seen during tough market conditions." One of the many emerging trends in the last 12 months has been an increase in end-user buyers, with soaring rents in Dubai cited as a major contributory factor. In its market report looking back on 2023, Betterhomes said that a combination of rising rents and a desire for long-term stability motivated tenants to transition into buyers. Developers, keen to entice the new buyers, have been using favourable payment plans and incentives to encourage renters to become property owners. One of the payment plans that's growing in popularity among developers is the one per cent offer, which lowers the monthly payments but increases the time the loan is paid back. The buyer pays a down-payment of around 20 per cent and then pays one per cent of the total price monthly until they own it 100 per cent. If it's a Dh1 million ($272,000) property, the down-payment would be Dh200,000 with a monthly payment of Dh10,000, spread over a period of 80 months – or six years and eight months. It looks more attractive to a buyer than the heftier payment terms of 20 per cent on booking, 30 per cent by handover, and the remaining 50 per cent within three years of handover. Danube Properties , which claims to have been the first to offer the one per cent payment in the UAE, said the plan has helped buyers "with limited income buy homes". However, as developers tend to use property sales to finance projects, the plan requires a lot more upfront funding. "This has helped our properties increase their appeal to end users who used to live in rented homes," said Rizwan Sajan , founder and chairman of Danube Group. "In order to achieve this one per cent monthly payment scheme, we had to endure a lot of financial pain, as we had to keep on paying the contractors on time, partly from the buyers' paid amount and sometimes either from our pocket or from bank finance. "Anything lower than this will be difficult for developers, unless they are already cash-rich and can develop projects with own resources." He said the plan reduces the buyers' burden of paying a hefty amount upfront. "We usually deliver homes after 36 months of the customer payments, including the initial down payment of about 20 per cent," he said. "After moving in, the homebuyers can enjoy their homes while the balance 40-50 per cent remain unpaid and we as a developer collect the remaining amount from them in the process." One of the newer payment enticements is offered by Dugasta Properties, which offers a 100 per cent buy-back option after five years on its Al Haseen Residences project in Dubai Industrial City, close to Al Maktoum International Airport. The properties, which start at Dh342,000 for a studio and Dh1,023,000 for a two-bedroom apartment, also come with a 50 per cent guaranteed return in five years and no service charges during that time. Lewis Allsopp, chairman of Allsopp & Allsopp Group , said the resurgence of attractive payment plans is a positive development for the market. "It serves as a catalyst for potential buyers who are on the verge of making a purchase but may face affordability constraints," he said. "Developers are providing these buyers with the chance to invest in the Dubai marketplace through accessible and budget-friendly payment plans. "Many individuals typically need to accumulate a 20 per cent or 30 per cent deposit before being able to make a purchase. "However, with the option to invest and save gradually, it becomes simpler to enter the property market, especially when prices are rising. This presents a fantastic investment opportunity." George Barker, senior sales consultant at Betterhomes, said while the payment plans "enhance the ease and affordability of purchasing for buyers", the main beneficiaries are often those "with significant liquidity or multiple assets". "First-time buyers in the region, particularly from the expat community, are predominantly opting for some form of financing to facilitate their entry into the real estate market," he said. Mr Barker said the resurgence of attractive payment plans in the Dubai market reflects the surge in developments being launched. "While payment plans and similar enticements have always been part of the landscape, the current market showcases heightened competitiveness and affordability in these offerings," he added. "The lowered mortgage rates have further increased affordability for everyday buyers, prompting significant responses from large developers." Betterhomes said that, despite higher interest rates, 2023 saw an increase in owner-occupiers buying properties due to soaring rents, because of a sharp increase in the population. "Betterhomes noted a substantial shift towards domestic demand, with buyers identifying as end users increasing from 38 per cent to 44 per cent," it said in the report. "This movement towards end-user home ownership is a great sign of the maturing nature of the market and should give confidence to greater price stability in the years to come." Mr Barker said high rents are "nudging potential buyers to consider the option of purchasing a property rather than continuing to pay elevated rents". "The consistent trajectory of the rental market, unyielding even post-Covid, and the projected 20 per cent increase in 2024 in prime residential areas of Dubai, further amplify this trend," he said. "If you're a resident who hasn't considered exploring property ownership in Dubai, you're certainly in the minority."

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