Dubai
With every other developer in Dubai offering more or less the same set of incentives, investors will need to increasingly go by their track-record to decide whom to deal with. Another way would be for local real estate authorities to step in and create different property fee structures.
“The best way would be to differentiate on the basis of “type of buyer” or “type of property”, and it’s something that’s been done in other markets,” said David Godchaux, head of Core Savills UAE, the property consultancy. “The various property fees could be structured differently for end users and investors, and also on the basis of the value of the property.
“But raising fees for all property buyers would not be the right way … that’s effectively penalising all buyers.” (The last time the Dubai Land Department intervened forcefully was by doubling the transfer fees to 4 per cent of the property’s value in late 2013. Also, the UAE Central Bank raised the limits on how much banks can led to off-plan buyers.) Voices are starting to be heard about how more developers are structuring their payment offers, with the bulk of the paybacks to be made after handover.
But in a marketplace where buyers are swayed by prices than anything else, developers are just providing what investors want. But that comes with a big risk, as it is setting off one competitive offer after another.
Instead of directly cutting down on their offer price, their post-handover payments promise anything between two to five years. That is now sort of becoming the norm.
“It’s another form of price war — developers have to ask themselves how much further they can shrink their margins,” said Godchaux. “It should never be allowed to reach a stage where their finances available to build are at risk.”
