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Dubai: There is a subtle shift going on in Dubai’s off-plan property sales market — enough developers are now starting to turn their attention to potential end-user buyers rather than concentrate all their energies going after the cash-ready investor.
The payment terms on some of the recent launches also reflect this realisation. More developers are willing to free buyers from committing a large portion of the instilments during the life cycle of the project. Instead they are backloading the payment plans, a sizable portion of the financial commitments kick into gear only after the completion of the project.
This way, potential buyers — and especially those operating to a tight budget — get to have a better handle on the payments schedule. This assumes significance given that mortgage lending rules require that lenders can only offer up to 50 per cent of the property’s value on an off-plan sales transaction.
For developers, the staggering of the payments post the handover of the project requires them to be on top of construction schedules and not get into resource sapping overruns.
According to industry sources, stretching out the payment plans remain the best possible way to get genuine end-users into the property buying space.
For its first project in Dubai, a cluster of 92 townhouses in Jumeirah Village Circle, Park Investments requires buyers to commit to a 50 per cent payment plan during the lifecycle of the project and the rest after handover. To sweeten the offer, there is also a six- to 12-month interest free period. Completion of the homes, priced just under Dh3 million, is scheduled for the first quarter of 2016. The overall project cost is estimated at Dh270 million.
Wider time frames
“If developers are financially sound and can manage the construction cycle and cash flow requirements well, they can afford to lighten the load on the buyer’s payment schedules,” said Parminder Singh Sehgal, one of the partners in Park Investments and a former senior executive in Emaar MGF, the Indian developer. “In the mid-tier of the market with pricing of Dh700-Dh1,200 a square foot, and that’s the space where we prefer to operate, developers typically tend to deal with an extremely value-sensitive buyer. (Park Investments is helmed by a group of investors with realty backgrounds from the US, UK, India and South Korea. For the Dubai exposure, it has an alliance with a local entity, Arabian Gulf Properties.)
“Apart from the cost of the property itself, for these buyers a wider time frame on the payments can be a major influence on the buying decision.”
For its first real estate development venture, featuring 171 townhouses with a price tag of Dh2.5 million and located in Nakheel’s Al Furjan community, the Danube Group required buyers to pay 10 per cent on booking and another 15 per cent within another 60 days. After that and right up to completion, the instalment is set at 5 per cent. Again, given the buyer profile for the project, the intention was to make sure the payment load factor was not too high.
According to Niraj Masand, partner at Banke M. E., developers are getting “aggressive” in the way they are courting potential buyers... and that’s in a nice way.
“Having realised that only perceptions are keeping investors cautious, many private developers are making their payment plans more attractive or creating tailor-made packages for the large investor,” said Masand.
“This way, a deal is secured and by offering an attractive payment plan, it gives buyers more value for their money. Private developers are also coming out with schemes wherein the payment plan goes on for a year and sometimes even two years post the completion of the project. This makes for a higher return on investment for investors.”
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Dubai' developers put squeeze on speculators
Dubai's developers seek out the long-term investor
Source: Manoj Nair, Associate Editor, gulfnews.com