It all started with a three year post-completion payment plan for property buyers in Dubai. Then came five-year payment plan and now it is 10 years.
All these payment plans for aimed at converting renters in the emirate to home owners.
Dubai-based Nshama, which is on schedule to deliver the first homes in its Town Square development in 2017, is selling Zahra Breeze apartments with a 50:50 payment plan.
“Pay 50 per cent in two years and the balance in 10 years,” according to the company latest promotion.
In January 2016, the company had launched a 70:30 payment plan.
Union Properties had previously launched a seven year payment plan after completion for its Green Community West project, while Danube Properties has offered one per cent payment plans on its Glitz project.
On the other hand, Dubai-bourse listed Damac Properties has announced guaranteed annual return on advance payments during construction of three per cent per year, which it claims “is equivalent to twice the interest on fixed deposits.”
Such payment and incentivised scheme offers investors who are not able to pay 25 per cent of the property value as down payment to buy a ready property, but allows them to own a unit in the emirate which has been featured among the world’s best cities.
In April, Dubai’s Real Estate Regulatory Agency Chief Marwan bin Ghalitha told Emirates 24|7 that 38 new projects were launched in the first quarter 2016, while 48 projects were completed in 2015. A number of companies have lined up new launches with announcements likely to be made in the second half of 2016.
# Construction frenzy
In its latest report, Unitas Consultancy said upswings in real-estate markets typically spark a construction frenzy causing developers to launch a series of new projects in order to try and capitalize on the surge in demand, as seen in 2002 and 2012.
“In order for developers to attract buyers they typically release off-plan properties at a discount to the ready market. This is to compensate for the risks involved in buying off plan (i.e. delays, build risk), and the loss of rental income over the duration on the project. However, the flexibility of the payment-plans coupled with the developer track record can either increase or decrease the discount,” it added.
The consultancy said that in a bull-cycle it is typical for off-plan properties to trade at a significant premium instantly after the launch.
“This is caused by speculators entering the market to try and ‘flip’ properties on the deposit amount to make supernormal profits. However, as ‘irrational exuberance’ fades away and the market recalibrates, speculators who could not resell the property go through a liquidity crunch as they try to meet their next payment forcing the premiums to fall. This fall is further amplified when the market turns bearish, and transactional activity dips,” the report said.