UAE: Developers offer lower down payments, flexible plans for off-plan property

The number of Dubai developers offering sales incentives as well as lower and flexible payment plans for off-plan properties are on the rise in order to attract new investors and end-users.

“The off-plan property market continued to maintain remarkable momentum, with both local and international investors eagerly acquiring newly launched units, attracted by the promise of strong returns on investment in a tax-friendly environment. However, it is worth noting a rise in the number of developers offering sales incentives, such as lower down payments, flexible and/or extended payment plans and promotional gifts,” according to real estate consultancy Asteco.

With growing demand for off-plan units, competition among property developers is also heating up as the market sees entry of some new foreign developers to cash in on high demand and high returns. Therefore, some of them are offering flexible payment plans and gifts to attract and grab the attention of local and foreign buyers.

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Developers are offering extended periods of payment plans that go beyond 4-5 years while offering monthly payment plans of less than one per cent.

Recently, a Dubai-based private developer introduced a payment plan spanning over eight-and-a-half years with five years of post-handover payment options.

In addition, more Dubai developers are also offering a 1 per cent per month payment plan which has been quite successful among the mid-budget properties. In fact, a developer recently announced a 0.5 per cent post-handover payment plan.

Some developers are also offering 10 per cent or even less than that down payment option to property buyers.

In terms of returns, many developers claim to offer buyers high single-digit returns, while some even claim to offer double-digit returns based on the location of their properties.

Enhanced financing option

Asteco further revealed that some banks in the UAE are offering 10 per cent additional financing for off-plan properties, where the construction stage of the project has reached at least 50 per cent.

Industry insiders suggest that lenders are offering these facilities to property buyers in off-plan projects of renowned and established developers in Dubai as banks don’t necessarily view real estate as an opportunity, but sometimes look at it as a liability.

“Some lenders started offering enhanced financing options for off-plan properties, allowing buyers to secure up to 10 per cent additional financing during the construction phase, supplementing the standard mortgage amount due upon completion. This additional funding is typically available for projects with at least 50 per cent construction progress, ensuring a degree of risk mitigation for the lender,” according to real estate consultancy Asteco.

“This move not only stimulates the off-plan market but also broadens accessibility to potential buyers,” it said in its second-quarter 2024 report.

Traditionally, banks offered 50 per cent financing while buyers would have to contribute the remaining half.

“The market’s underlying fundamentals remain strong, supported by high levels of equity in the real estate market, continued economic growth, infrastructure development and a growing population,” it said.

Industry insiders say that lenders offer financing in projects of Tier 1 developers and only in those of big developers that have a long track record of delivering projects.

As reported by Khaleej Times earlier, most projects are flush with cash as they have introduced payment plans that allow them to collect up to half of the payments within 14 months of the project's launch. This ensures that developers have plenty of funds at their disposal and the project will be completed on schedule, if not early. These payments are mainly introduced to some of the Tier 1 developers in the emirate.

Off-plan segment expanding fast

• Surging demand and new project launches propel Dubai’s off-plan market