Dubai: Developers with upcoming off-plan launches have to take it upon themselves to ease the entry of potential buyers into the property market. And such incentives should not be limited to the price alone.
“New launches stand a better chance of finding committed buyers if developers limit the upfront payments and make sure the rest of the payments come post completion,” said Zafer Taher, CEO of G&Co, a developer which has three ongoing upscale projects at Meydan City.
“Under those payment terms, I believe buyers stand a better chance of getting a mortgage facility from banks in the current market situation. And if the bulk of the payments are staggered post completion, buyers can even have pre-approvals for the project to be treated as a completed one.” (Under the current Central Bank requirements, banks can offer only a maximum of 50 per cent loan-to-value on off-plan projects.)
According to Taher, developers could also do well to set their sights lower — “If developers in Dubai are used to 30-40 per cent returns, there is no harm if those were now revised to 20-25 per cent. Times have changed … developers must learn to work with the new realities.”
How developers can restructure payment terms can resonate with new market realities. It could even help alleviate the concerns of buyers with off-plan properties on their hands.
“Where mortgages do create distressed sellers is when they are used to buy off plan property,” said Mehroz Majeed, Residential Consultant, Better Homes Real Estate — Marina Branch. “We saw a lot of this in the years preceding the financial crisis and we’ve started to see more off-plan purchases through mortgages as developers have started to launch new developments.
“In these cases a buyer has a payment plan to maintain or a mortgage to facilitate while no rent is coming in. Therefore there is far greater financial pressure and which in some cases leads to distressed sellers.”
