Dubai: Some of the biggest developers in Dubai are starting to offer more flexibility if buyers miss out on their next installments on handed over properties. This means that if payments are missed, the developers will not immediately initiate legal action.
In such cases, one master-developer said it will take on the management of the property and collect rents from the tenant (if it is leased out). This effectively removes the ‘forfeit clause’ that developers enforce when payment schedules are not met.
Not just that, the developer will also work out ways to get a grip on the payment situation. If the property has been rented out, all cheques collected from the tenant will be handed over “without delay”.
The developer will take over the responsibility of the property as soon as a payment default happens. It is then entitled to use any amount collected from the tenant to settle any late payment charges due under the SPA (sale and purchase agreement), any outstanding service fees, any payment to the authorities or utilities service providers.
And then from what’s left, contributions will be made to the purchase price of the property.
This way, the property owner will have more time available to get on track on the payments. The move comes as developers in Dubai put in place options if there were sudden increases in defaults.
“Developer incentives that are now being offered reflect their intent in resolving payment and liquidity issues being faced by end users/investors,” said Sameer Lakhani, Managing Director at Global Capital Partners. “The removal of the clause in some cases is a step that is likely to be emulated by developers big and small in the coming months as the real estate market seeks a post-Covid-19 way back.”
So far, there are no reports of a major increase on property-related purchase installments. Most of the big developers say that the majority of payments due to them in the first six months have been collected, and that talks are on those where the buyers are asking for deferment.
The move by some leading to developers not to pursue forfeiture of the sale contract when payments are missed reflects maturity. No developer wants to be caught in a situation where their legal teams get to be as active as those handling sales or the construction side of it.
“As always, Dubai’s big developers are showing the way in tackling the uncertainty caused by COVID-19 on buyers’ incomes,” said an industry source. “If they give the assurance that their asset – the property – is safe, there’s more motivation to clear the rest of the payments.”
Sources say private developers too could come up with similar measures to boost confidence among their buyers. Thousands of new homes will be delivered over the next nine months, and when they do, installments will start kicking in and that’s when the strain on buyers will be at its peak. (There are also several projects where payment plans stretch to five years and more. Developers behind these ones are unlikely to offer such relief provisions.)
Much needed clarity
The latest relief measures from the big developers is clear about what they intend to do with the property when they assume responsibility for it. The property owner will get back the rights on “full payment of the purchase price along with any outstanding late payments charges and service fees”.
Now, these relief measures apply to those ready properties where the owner has rented it out. But in instances where the owner is also the user of the property, the relief on offer may not seem much. The owner will then have to take out alternate rental arrangements for his own requirement, while his property is taken care of by the developer.
On offplan projects where installments are due, some developers are allowing buyers to switch to more recent launches and where the completion dates could better suit their payment prospects. All of the payments made to date will automatically be credited to the new unit chosen.