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Dubai: Dubai’s developers are finally getting a firm grip on speculators when it comes to off-plan purchases. And the formula they are using is quite simple — make sure that the property buyer is committed to an at least 30 per cent payment before he can think of selling. In some cases, the threshold limit could be set at 40 per cent.
It was the master-developers who were first to come in with such stricter requirements, from the second-half of last year, on when an off-plan property could be released into the secondary market. But such was the demand for Dubai property among investors, most of them outright cash buyers, that these provisions did not make much of a dent at the time. It is not the case now.
More private developers are anchoring their sales and purchase agreements (SPA) with the 30-40 per cent requirement.
“Dubai had experienced a surge in sales during the last 18 months with substantial volume transactions recorded at the Land Department... in some cases we had seen prices increase by 40-50 per cent within 12-18 months,” said Rahail Aslam, CEO of Select Group, which launched two upscale tower projects since the start of the year.
“It’s comforting to know the market has not continued in this fashion and is taking a needed pause.”
And a pause is exactly what the market needs at this point in time — a slower pace of property value growth and buying activity gives it the breathing space that it was in dire need of. For a developer with an off-plan launch, it allows them to focus attention on seeing the project through its construction paces without the distraction of having to see how those properties are faring in the secondary market.
“We have provisions in the SPA that restrict sales until two instalments are paid, which essentially equates to 30 per cent,” said Aslam. “In addition, there are the ‘Oqood’ registration fees of 4 per cent [that need to be processed at the Dubai Land Department] — this is another safeguard for developers to ensure they are principally dealing with end-users and long-term investors.”
Earlier this week, the Damac chairman, Hussain Sajwani, also voiced the strong opinion that developer initiated provisos are doing their part in cooling growth down to more manageable levels.
“There is the 20 per cent deposit that we insist on at the time of the purchase and a first instalment of another 20 per cent within the first six months of the deal,” said Sajwani.
“Together these represent a sizeable commitment on the buyers’ part and enough to secure them to that transaction for the longer duration. It is a natural process by which speculative buying can clearly be controlled — the best part is that it’s working.”
Onus should come from developers on safeguards
Local developers should have the leeway in setting the safeguards that would curb speculative buying in the marketplace, according to Damac chairman Hussain Sajwani.
“Rather than have a set of measures handed down from the authorities on property purchases, the developers are better positioned to come up with their own means,” he said.
Source: Manoj Nair, Associate Editor, gulfnews.com