Two years after handover are turning out to be the average, while others offer more

Dubai: Dubai’s developers sure are getting generous — more than 55 per cent of off-plan launches in 2016 offered buyers the incentive of payments with a post-handover component that could stretch to two years and more. The more generous ones even extended the offer to five years.
That offers a stark contrast to the situation in 2013, when 80 per cent of the launches had payment plans tied firmly to the period up to their handovers, according to data from Reidin-GCP. Clearly, the developers believe that an elastic payment plan works to their advantage in winning sales during what could be the early stages of a market stabilisation.

They have also been enthused by the fact that rentals in Dubai have not gone through a sharp correction as property values did. What this means is buyers who want to rent out their units on handover can be reasonably assured of securing rates that will help them meet payment obligations to developers/banks. (Locations such as Business Bay, Jumeirah Village Circle/Triangle, Dubailand and Sports City are in particular favoured among such investors.)

But they must hope developers meet their end of the bargain, by finishing the projects on time. Any delay could affect the property’s rental prospects, more so as Dubai’s master-developers are creating massive new residential stock that they intend to lease out directly. The bulk of these are coming up in the emerging locations of the city, such as Nad Al Sheba, and in Deira.

Interestingly, developers with recent mid-market launches have been resorting to more of post-payment handover plans. “Supply priced above the 1,200 per square foot (psf) level has not experienced the extent of developer facilitation, as has been the case with lower psf rates,” states the Reidin-GCP report. “This implies that back-ended payment plans have been in the domain of the mid-market segment more predominantly, and where they have been offered in the luxury space, it has been predominantly in the larger absolute ticket size items such as villas.” (Or they have been offered on emerging upscale locations such as Dubai Creek Harbour, where up to 40 per cent of the payments could be stretched over two years after handover.)
But if a good majority of developers are offering incentives around payment schemes, they could soon find that this has its limitations. “But it’s very difficult to rein it back once the genie is out of the bottle,” said Sameer Lakhani, Managing Director of Global Capital Partners. “Developers with a better track record on timely deliveries have had more success with this incentive. In terms of differentiation, the transaction pattern profile clearly reveals buyer preferences.”

The shifting dynamics of payment plans in Dubai property market
* Both private sector and government-owned developers began to change their payment plans from being front-loaded to back-ended in mid-2014 as the market began to correct from their 2012 to early 2014 surge. “It remains to be seen how and when these incentives can be withdrawn,” states the Reidin-GCP report. “Similar to the US Federal Reserve’s quantitative easing, the reversal of such stimuli is bound to be precarious. It will be interesting to see how developers traverse this path.”

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