Why direct from developer makes sense in Dubai realty

Dubai realtyImage Credit: Supplied

Dubai: “Buy now and pay at leisure” — Dubai’s developers are sharpening their sales pitch that would get them the end-user buyers they are so keen on as overall market sentiments remain steadfastly subdued.

By being flexible with the payment plans, the developers believe enough end-user interest can be generated to compensate for the lack of investor-led buying that has dominated Dubai’s property transactions.

Developer financing for home purchases could get a qualitative upgrade in 2016. “It’s when the market is at its slowest that developers need to do more to create the selling opportunities,” said Rizwan Sajan, Chairman and Managing Director at Danube Group, which formally launched sales of its fifth residential project, the Ritz.

“We are going for the salaried residents rather than investors. In our estimates 80-90 per cent of expatriates are still living in rented accommodation.

“Our payment formula is straightforward — stretch it out over 6.5 years of which four years fall after the handover. And keep the payment plan to 1 per cent per month of what needs to be paid after the 10 per cent down payment and another 15 per cent immediately thereafter. There’s no bank involved.

“From a buyer’s perspective, the best part is being able to make the majority of the payments after the handover. If he were to let the property out, his EMI (equated monthly instalment) can just as easily be made from the rental income.”

With the Ritz, located close to Discovery Gardens, Danube works the numbers on a buyer’s behalf. “Rents average Dh75,000 for a one-bed at Discovery Gardens ... and by the time Ritz gets handed over it’s my belief that rents can go up further,” said Sajan.

“A one-bed at the Ritz is going for Dh750,000 — on these numbers a buyer can easily recoup the EMI via the rental yields.”

Eschewing banks and buying direct from — and paying off — the developer has many pluses from a buyer’s perspective. He escapes the burden of putting up a substantial upfront payment, which is something that banks require to qualify for the mortgage.

But being able to stagger a significant part of the payments after the completion is what counts the most for a buyer. If the developer offers interest-free payment plans, all the better.

For developers, direct financing works to their advantage in a marketplace that had seen quite a sizeable number of off-plan launches in the last 24 months. Those who can be just a little more flexible on the payment terms stand a better chance of selling their inventory whatever be the state of the market.

“Across the five properties, which together account for about 1,000 homes, we have sold around 95 per cent of the inventory,” said Sajan. “The 1 per cent payment plan and backending the bulk of the instalments is a formula that’s worked for us. And I believe in not changing a winning formula.”

According to Ranjeet Chavan, Director of SPF Realty, the brokerage firm, “Off-plan properties come with the benefit of staggered payment options depending on buyers’ perceptions and requirements. With developers coming with attractive payment plans, the options for investors open up further, helping [create] some very good deals in the market.

“The first two quarters of 2016 should be similar to the [slow] pattern seen in 2015 ... We believe the last two quarters of 2016 should see higher demand. The anticipation is that from 2017, prices will start to rise at a stable pace.

“Our recommendation is to buy real estate in 2016 because of the lower price points, higher rental yields and lower mortgage rates that currently are on offer.”

Source: Manoj Nair, Associate Editor, gulfnews.comGN


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