Dubai property companies gild welcome mat for buyers
Published on 06 Feb, 2017
For the past few years, Dubai property companies have made concessions to buyers to entice them into new homes built in a burgeoning real estate market, and now there's more reason to believe buyers are in the driver’s seat: A recent article from Zawya shows key developers in Dubai offering “post-handover payment plans” of up to eight years.
The properties are in a development called Green Community West, a project of Properties Investment, in conjunction with Dubai Investments and Union Properties. The homes range from 4,200 to 4,500 square feet, at around $231.50 per square foot.
While the phrase “post-handover payment plans” appears to be a bit of real estate jargon specific to the United Arab Emirates and the immediate area, a recent article in Al Bawaba Business explains that this kind of deal offers a payment plan in which buyers can put in a minimum investment during construction and make monthly payments after the property is handed over.
While these "sweetened deals” might be tempting, the article also warns buyers to look at the entire agreement and make sure it's more favorable than a traditional financing option. Niraj Masand of Banke International suggests buyers consider these types of agreements only with reputable developers.
On the other side, developers need to match projects to what the market will bear, Zawya said.
“Much depends on the payment structure to convince whatever number of buyers there are out there now,” Properties Investment Chair Khalid Bin Kalban said. “There is no way any developer can determine actual demand … . One thing the market should guard itself is against oversupply … but based on what we see now, 2017 should offer better prospects than last year.”
The Gulf News Journal spoke with Rustum Tambe at the global research firm Aranca about real estate deals in the area. As an analyst, Tambe has researched equity markets in the Middle East for leading buy- and sell-side research firms.
Tambe said property prices in Dubai have been declining for three years and are around 13 percent lower than they were at their peak in 2014. He cited a strong U.S. dollar, combined with low corporate earnings and job creation, as challenges facing the UAE after the recent drop in oil prices.
Tambe said the property market in Dubai had fallen for seven quarters in a row until the third quarter of 2016.
“It has largely stabilized and remained flat on a monthly basis since August 2016, possibly indicating it has reached its cyclical trough,” Tambe said. “The government’s commitment to boost spending on infrastructure and real estate facilities ahead of World Expo 2020 can be expected to provide some positive sentiment to investors and developers, which may lead to a potential uptick in prices from mid-2017.”
Tambe said this more positive outlook has driven some developers to sweeten the deal for buyers to help boost sales now, such as offering similar deals to what Properties Investment has, or coming up with their own incentives.
“Such offers further confirm the property developers’ strong expectations of an upturn in the market,” he said.