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Dubai's offplan launches are coming thick and fast, and demand remains consistently high. But end-user buyers may need some help on the payment side of things. Image Credit: Shutterstock

Dubai: Developers in Dubai should try and bring down the number of instalments they demand during the construction phase on offplan property purchases. This is one of the few incentives they will need to start offer to ensure end-users remain interested despite the steep hike in mortgage costs and property prices.

“Most developers now do not offer post-construction payment plans,” said Wassim Abdallah, Head of Offplans and Investments at Betterhomes, the estate agency. “What this means is that 50 per cent of the property value should be paid off within the three years of construction and the other 50 per cent on completion. Some developers are even increasing the amounts to be paid during construction from 50 per cent to 70 per cent and the remaining on completion.

“This has not helped end-users when it comes to mortgages.”

Pay upfront

These changes are being enforced as offplan launches have risen in Dubai since the start of the year. Developers are asking for more instalments during the construction phase because, one, they too are dealing with hikes in cost of construction, and, two, they want to cut down the risk of defaults happening on the instalments.

Also, developers are seeing more overseas investors, especially from Europe and Russia, and they all tend to be cash upfront buyers. For the first time since the Covid phase, these cash-ready investors are taking prominence in developers’ plans, and at the expense of genuine end-users.

In their defence, developers say construction-related costs have seen 30-40 per cent increases from the spike in building material prices since late 2020. While supplies of these building materials are getting better, costs are yet to drop anywhere close to 2019 levels.

"A year ago, the payment plan most developers had in place would be paying a certain percentage during three years of construction and the remainder to be settled within two years post-construction," said Abdallah. "This helped buyers pay in installments and borrow less from banks."

Wassim Abdallah
Wassim Abdallah of Betterhomes said: "The best way would be to put down larger deposits, and reducing the amount borrowed from the banks would really help."
Flexible post-handover terms of the past
During the 2015-20 downturn, there were many developers willing to extend 5- or 7-year post-handover payment terms, and this was done to convince end-user buyers that they can manage their payments better.

Discounts are coming

In recent days, some developers have offered 10-20 per cent discounts on the property value if a buyer is willing to put in a higher down payment. Clearly, the steady rise in mortgage rates is starting to be a concern for prospective buyers and developers. But with property values continuing to gain, discounts alone will not help end-users. They will need mortgage support too.

Will banks step up?

The value of mortgages written in Dubai during May was about Dh5 billion – and that’s a 19.4 per cent drop from a year ago, according to data from During the month, there were 1,706 mortgage-backed deals, which is 12.6 per cent lower from May 2021.

Value of homes sold is also on the rise – “The price of offplan apartments more than doubled due to the fact sales in May were mainly in Downtown and Business whereas in 2021 were mainly in the affordable areas,” the report adds.

The average transaction value for an apartment sold is now at Dh1.5 million, which is 109 per cent over from a year ago. For end-users who had been waiting to enter the market this year, they are facing a double blow – higher property values and which continue to rise, and steep increases in mortgage rates.

Options to spend less?

According to Abdallah, “The best way would be to put down larger deposits, and reducing the amount borrowed from the banks would really help. Another option is to buy an offplan property that is nearly ready as buyers then will avoid the premium they would have to pay in the secondary market. In addition, with developers there might be a chance to waive the 4 per cent Dubai Land Department fees as well as not incurring agency commission fees.”

Property buyers will take any option if that means having to pay less.