Dubai: Leading developers in Dubai are considering proposals to defer some of the immediate payments due from their offplan property buyers as a result of the devastating rains that swept the country last week. If these plans are approved, property owners could benefit from not having to make any instalments in the next 1-3 months.
These internal discussions at developers have gained fresh urgency after the UAE Central Bank directed local banks and insurers to stay payment instalments due from their consumers for up to 6 months.
“We are aware that some of our customers have more immediate needs of their funds, and that could cause problems in meeting their payments to us,” said a top official at a leading developer with multiple projects in development. On many of these projects, their sales are based on a ‘1 per cent’ monthly payment from buyers.
“We are talking to our property buyers and will soon come up with a solution that benefits us all.”
Developers also have immediate concerns of their own, with many of their construction sites having been affected by water logging and other damages. Along with their contractors, they are still in the process of taking stock of the extent of the restorative works that needs doing at sites, and how to get the funds released from insurers to take care of this.
Now, getting those claims processed and for those funds to come in will take time. Insurance industry sources declined to give specific timelines on when they expect to clear those funds.
Not passing on costs to property owners
Developer sources are emphatic on one point – whatever the scale of the damages to their sites, these costs will not be passed on to investors.
We are likely to be announcing deferment plans in the coming days exclusively
According to Farhad Azizi, CEO of Azizi Developments, “We bear the costs of this unprecedented natural disaster rather than our valued investors having to. Be it the downtime of manpower or any rectification works that have to be done following the impact of the rains which we were able to keep at a very minimum in our communities.
“For our buyers to be unaffected, we have taken it upon ourselves to cover any price necessary to deliver our homes in adherence not only to their set construction timelines, but also to the quality standards that those who invest with us know us for.
“For those who have bought properties already handed over, and who still have dues payable to us, we are indeed considering implementing more leniency in collecting these from them.
“We are likely to be announcing deferment plans in the coming days exclusively for those who are affected by the record-breaking rainfall.”
Deferred mortgages
Those with imminent mortgage payments will already have got their relief. As per the Central Bank instructions, banks are expected to let their customers know of the deferment relief in the coming days - if they haven't done so already. And deferments of 6 months...
"It will be interesting to see how many instalment deferments developers will allow," said a source. "That most developers would opt for between 1-3 payments is what property owners are hoping for." (Azizi added that two experts from Germany are being recruited to oversee all their project site activity. "This is a preparatory measure to eliminate the possibility of seepage and water ponding at our under-construction communities so that they can weather any potential future storms without a single drop of water appearing where it shouldn’t," he added.)
Recent incidents and challenging weather conditions have led to reported and anticipated claims (on insurers), further driving up costs. This anticipated rise won't be limited to motor and medical insurance - other lines like property and engineering will likely see increases as well
How quickly can construction commence
Come what may, there will be quite a bit of communications flowing between developers and property owners related to the fallout from the rains. Some developers have already informed buyers that completions and handovers will be delayed because of the halt to on-site activity.
This could significantly reduce the number of handovers expected in the second-half of 2024, and which will have its own impact on developer cash flows. As per the current rules, developers can take up to a further 12 months for handover from the promised completion date from unforeseen circumstances.
Last week's rains would surely count as one...
