DESPARDES News Monitor – Dubai property developers are going the extra mile to dispose off unsold stock ahead of potential upcoming supply of over 50,000 homes this year.
Lucrative incentives, innovative payment plans and freebies are being offered to investors and tenants to own a home in Dubai.
Extending post-handover payment plans on off-plan properties to ready homes as well as arranging bank financing for initial down payment of the property are some of the incentives being offered.
Extended post-handover payment plans from three years to anything up to 15 to 20 years, rent-to-own schemes and guaranteed rental returns are now the industry norm as the developers get creative to compete with other investment markets.
The most popular have been the post-handover payment plans, rent-to-own and new schemes such as the one offered by Emaar and DMCC.
“Developers are very aware that they need to be creative with new offerings to attract more foreign direct investment and be competitive with other popular investment markets,” said Lynnette Abad, director of Research and Data, Property Finder.
Recently, developers have also been playing the role of banks to stimulate demand for both off-plan and ready properties with ingenious payment plans. This is because under the current loan-to-value requirements in the UAE, the majority of buyers find it difficult to raise bank finance, and establish a foot on the ladder, due to hefty deposits and fees required.
The latest incentive deployed by one of the developers (Azizi Developments) for a newly launched scheme is to partner with one bank for down payment loans while another financial institution will service the remaining portion of the mortgage.
This has been conceptualized to bring in people who cannot afford the initial down payment. The first bank in question is also offering a six-month interest free facility to customers.
While government-affiliated developers are the ones offering flexible payment plans and rent-to-own schemes for ready homes, private players are jumping on to the bandwagon as well. Nakheel is offering a payment plan where buyers can move in now and pay across seven years. Customers only need to put down a five per cent deposit. Other perks include no Dubai Land Department fees, two years free service charges and two years free club membership.
Market experts say the rent-to-own schemes could see a good take-up since tenants only need to produce a small down payment unlike the 25 per cent sought by banks for mortgages.
Some developers are also offering back-loaded payment plans for a slew of its off-plan projects across Dubai. These developers offer post-handover payments for buyers of ready villas.
Emaar is also providing a scheme where buyers of an apartment get a three-year renewable business licence, three-year renewable family residence visa and 100 per cent business ownership in DMCC.
Similarly, Sobha Realty is offering a discount on school fees for those buying an apartment in its project.
Also, in a bid to offload unsold stock from their inventory, developers are offering a guaranteed rental return for several years on their serviced apartments to bring in investors.
Even in the rental market, some developers are offering up to 12 checks and adding in sweeteners like a month’s free of rent to fill up unoccupied units in their housing communities.
The development comes amid a new report that property prices in Dubai continued to drop in the first quarter of the year, and are currently down 27.1 per cent compared to the peaks seen in mid-2014.
In terms of rents, the VPI – which monitors 16 apartment and 10 villa locations within Dubai’s freehold market – found that rates had declined 23.5 per cent since 2014.
For 2019, expected supply has been adjusted downwards – 54 per cent less than the preliminary supply forecast. More delays are also expected during the year, mitigating excessive supply concern, the report added.
Ratings agency S&P also predicted earlier this year that prices in the property market will not recover in 2019.
A recent report by Property Finder also found that a record 486 property companies and real estate brokerages that were in business in 2017 did not renew their licences for 2018.
However, Abad is upbeat about Dubai properties and rental market.
“Dubai’s ability to innovate and implement new strategies and regulations in a quick manner has and should continue to support the real estate sector,” said Abad.