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The past few years have seen many developers offering attractive back-ended payment plans that stretch up to four years. This, combined with a dip in of between 12-15 per cent in the past few quarters, is giving both end users and investors good opportunities in the market.
Aside from innovative payment schemes, some developers are also offering interest-free equity monthly installments, while others are waiving off the 4 per cent Dubai Land Department fee. Still others offer guaranteed return on investment (ROI).
''The developers are competing with low-priced ready and off-plan resale property, hence they offer post handover payment plans for their new launches,'' explains Ryan Blair, Investment Manager and Off-Plan Property Sales Specialist at Ere Homes Real Estate Brokers. ''It is evident that supply in Dubai outweighs demand, therefore, developers have to be innovative in their efforts to entice buyers.''
Post-handover schemes have been extremely attractive and in many ways have aided developers in pushing sales in an otherwise slow market. However, Blair says, ''The product, price and location are still of utmost importance. Where some developers have seen fantastic success when offering post-handover payment plans, others have not taken off as quickly. Developers such as Danube Properties have seen tremendous success of their Danube Ritz project in Al Furjan with only 53 per cent expected to have been paid on handover, while continuing with installments of 1 per cent per month after completion.''
Government-owned developer Jumeirah Golf Estates also offers a one-year post-handover payment plan for its AlAndalus project. However, Blair says the developer does add a markup of 5 per cent on top of the selling price.
MAG Property Development offers a five-year payment plan, starting from only Dh7,500 per month for its MAG 5 Boulevard development in Dubai South. Blair says under the payment terms, monthly installments will continue after the handover in 2018.
Even Dubai-based master developer Emaar Properties has offered a post-completion payment plan for the first time. Buyers of its recently launched Sidra by Emaar in Dubai Hills Estate can pay up to 40 per cent of the price over two years. ''The phase one of Sidra villas were all sold out within two days,'' says Blair. When a developer like Emaar offers post-completion payment plans, Blair says others are likely to follow suit or come up with innovative ways to compete in the market.
Ghreiwati Property Development's Murano Residences in Al Furjan is also being offered with an option to pay 64 per cent of the price during the construction period and the remaining amount in 36 months after the handover. On the other hand, G&Co — Viridian at The Fields in MBR City provides a six-year payment plan, with 65 per cent payable after handover — 15 on handover and 50 per cent over three years.
Kalpesh Sampat Director and COO of SPF Realty, says post-handover payment plans have been very attractive in the market. ''A buyer gets to plan for a financial commitment over a longer timeline and it also enhances rental returns to double digits in some cases,'' says Sampat. ''Moreover, their money goes into an escrow account, and when you have a post handover plan, it makes the buyer more comfortable and reduces the risk of money being tied up in case of significant delays.''
Suraj Rajshekar, General Manager of Rocky Real Estate, says the post-handover payment schemes extensively floating in the market are becoming a winning proposition for all parties involved in a real estate transaction. ''They help the developer create brand value in the minds of the customer and boosts the confidence of the buyers in Dubai's real estate sector,'' says Rajshekar. ''It also entices both end users and investors to put their funds in the Dubai property market, which is currently offering best property deals with attractive entry points to buyers.''
With the popularity of such schemes, Rajshekar says past-handover payment plans have become a unique selling point for brokers making a sales pitch. Such payment plans also appeal to end users and investors who want to buy off-plan property but are unable to get a financing facility.
The key advantage for end users is that they can move into the property and pay the EMIs for their own property instead rent. ''They will have to arrange funds for paying only a 40-50 per cent of the cost until the handover as the remaining amount is stretched over two to four years, as per the developer's terms,'' says Rajshekar. ''And after the project handover, banks will readily lend money because the buyer now has the title deed.''
On the other hand, the back-ended payment schemes also benefit investors through higher returns. For example, an investor who purchases a Dh1-million property would have to pay the full amount at handover. He could then rent out the unit for Dh100,000 annually and get a gross return on investment (ROI) of 10 per cent. When the same unit is purchased with a 50-50 payment plan (50 per cent during the construction period and 50 per cent in three years after handover) and rented out for Dh100,000 annually, the investor would get a gross profit of 20 per cent as the cash outlay at the time of handover was only Dh500,000. However, the buyer will also have to pay the EMIs to the developer, but the extra gains are certainly enticing to investors.
Rajshekar says in a slow market, it is usually the developer that offers good projects in good locations and an attractive payment plan that can sell. ''A developer should look at schemes like 80 per cent post-handover; what we see now in the market are 50-50 or 40-60 schemes since most developers want to play it safe,'' says Rajshekar.
''While the current post handover offers are appealing to buyers, they still put a little bit of stress during a slow period since buyers need to pay 40-50 per cent of the amount. These 50-50 or 40-60 offers are very attractive when the market is good. For instance, in 2013 Al Fahad Holding launched its project with a 50 per cent payment plan over four years [after handover]. During that period, the developer was able to raise the selling price from Dh950 to Dh1,450 per square foot because it had spread very well in the market. However, I believe developers can look at more generous plans to boost their sales in the present market.''
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Source: Hina Navin, Special to Property Weekly