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Tuesday / November 20.

Dubai developers cannot thrive on sweetened incentives

The small private players could make an earnest start by doubling down on quality

With competition growing among developers to provide the most attractive offers, the focus now is to see whether they can continue with spreading out of post-handover payment plans. While such plans are pretty commonplace, the competition has been extended to offering increasingly longer plans, sometimes of up to eight years.

For buyers, going the off-plan route, it is an opportunity to have ownership of a property on favourable terms, and without having to pay in full upfront. Plus, this is aided by the structured payment plans for an agreed duration.

Of course, the factors prompting investors to buy off-plan boils down to the launch price. If this price from the developer is going to be much lower than the final handover price, that would put them near instant capital gain.

For some investors, it is an opportunity for them to sell the property before the construction completion … and if there is capital gain, cash in. This would work if there is another opportunity for them and they need the liquidity. Or decide to cash out after weighing up the cost of owning a property, like that associated with maintenance.

There is also the opportunity for buyers to achieve decent capital appreciation at the secondary sales stage, as these are often padded up with other incentives, including furniture assistance and on property management services.

Some of the big developers in Dubai, effectively government-controlled, are of the mindset that the current supply and demand will, to a point, run together. Their belief is this should then allow a fair market return on investment, and in theory stabilise the market. And end up benefiting developers and end users.

Cautiously optimistic

For smaller and less established developers, the issues are that offering longer and cheaper payment plans is a race effectively to the bottom. Having such payment plans provide the unwelcome possibility that someone may default after losing a job, market conditions could change, or uncertainty that post 2020 may not bring the upturn many were hoping for.

However, many in the market are cautiously optimistic that demand is still there as more renters start looking to move into these off-plan buying agreements. They realise that today the market is very much a buyers’ one, where there is the freedom to pick and choose a payment plan that fits their budgets.

This outlook appears to align with Dubai’s population growth forecasts and a favourable environment to invest. It could even mean that the upcoming units released into the market over the next five years should be filled up.

Only offering quality projects and payment plans that fulfil the needed requirements will help the target customer and create lucrative dividends for partners.

The writer is CEO at Unique Properties.

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via GN