Dubai: Property buyers in Dubai can take their pick of the many post-handover payment plans developers have lined up for them. Should they try the one for three years? Or opt for five?
If still undecided, they could even choose to pay off 10 years after handover? Or stretch it to 15.
Whatever be their choice, the spread of post-handover plans ensured off-plan sales in Dubai are up more than 20 per cent for the first nine months. (Even though new off-plan launches are way down from their 2018 and 2017 levels.) But can this post-handover driven sales rush be sustained? Critics of such plans say that developers could be exposing themselves to future risks if many of their buyers stop making those payments. And that this could have fatal consequences for developer cash flow.
But Imran Farooq, Group CEO at Samana, dismisses such talk as broad generalisations.
20%Rise in off-plan sales in the Dubai in the first nine months
“It’s because of these post-handover plans that someone earning Dh15,000 or even Dh10,000 a month are able to participate for the first time,” said Farooq, who has two projects on the ground at Arjan and will soon launch another at Studio City.
“Typically, you only had the rich coming in to buy property in Dubai … in the last two years, that’s changed because you have the real end users coming in. For our own projects, 70 per cent are first-timers, and they are not doing it for speculative purposes. There are even housewives coming in now, meeting the payments from their monthly savings.
70%Buyers at Samana’s projects who are first-timers
“But the biggest shock for me, at least with our projects, was finding young, salaried UAE nationals coming in to buy. Again, these post-handover schemes help.”
Even the biggest names in the local development business have such schemes on offer with the latest launches. But they tend to cap the number of years at between three- to five-years.
But with newly completed homes getting delivered thick and fast, developers will want to make sure that they are not left holding unsold units. They have already experimented with apartment sizes, making them smaller than was the case earlier, and thus bring the property value to more attractive levels.
Samana’s two ongoing projects have a base price of Dh399,000 with a 10 per cent down payment and then the rest of it paid at 1 per cent over 90 months. This way, about 60 per cent of the payments will be done after delivery.
Where’s the risk?
Now, this is where critics of long post-handover plans say the risk lies, if many of these buyers face job losses. But Farooq counters this thus: “I’ve got 250 units at a project … now it’s hardly likely that all these buyers will lose their jobs at the same time.
“Sure, some may have financial issues, but Samana has an internal unit that can take care of this.
Our redemption unit will help the affected buyer sell his unit, who by the way would already have paid off 20-30 per cent of the property value before his problems started.
“So, when he sells to the new buyer, the maximum loss he would suffer is the 4 per cent paid for the registration.”
No bulk deals, please
But on one sort of selling, Samana draws the line. The policy is not to sell more than five units in one go to any single buyer.
“If one guy holding 50 units out of a 200 unit project defaults, you have a 25 per cent non-payment issue,” said Farooq. “These are the buyers who are more likely to default when the market tanks … and that’s when developers face grave issues.
The biggest shock for me, at least with our projects, was finding young, salaried UAE nationals coming in to buy. Again, these post-handover schemes help
“Two such bulk investors in a project defaulting would mean that project does not have a chance to get built. Always better to go with individual owners as much as possible.
“Also, with bulk purchases gone bad, it takes longer to terminate the whole process and then getting in new buyers. That’s the time when post-handover plans get way too risky.”
As policy, the developer says it has no intent to hold back units — residential or retail — within its projects for the rental market. “We see ourselves as a manufacturer and not a landlord. It’s best to clear all the inventory in a project and hold the payment receivables.
“This way, we get to be cash-rich and not inventory-rich.”