Property developers in Dubai are offering potential buyers a range of incentives, such as flexible payment terms and buy-back options, as competition heats up in the emirate's booming property market.
Dubai's property market rose to its highest level in nearly 10 years last year, with record sales figures in 2023 in an increasingly competitive sales market for developers and brokers.
Last year set new records for value and volume of sales according to real estate broker Betterhomes, which said September saw average prices surpass the previous peak set in September 2014.
A slew of new projects in recent months, however, has increased competition among developers and brokers in the emirate.
Developers are increasingly exploring ways to connect with customers and offering attractive payment plans is one such option, Swapnil Pillai, associate director of research at Savills Middle East, said.
"An attractive payment plan helps end users and investors with their investment decisions, as most of these payment plans have a limited upfront commitment, with most of the payments committed towards the handover of the development," he said.
"Post-handover payment plans are also one of the options that developers have offered in the past. However, most of these incentives are usually seen during tough market conditions."
One of the many emerging trends in the last 12 months has been an increase in end-user buyers, with soaring rents in Dubai cited as a major contributory factor.
In its market report looking back on 2023, Betterhomes said that a combination of rising rents and a desire for long-term stability motivated tenants to transition into buyers.
Betterhomes
Developers, keen to entice the new buyers, have been using favourable payment plans and incentives to encourage renters to become property owners.
One of the payment plans that's growing in popularity among developers is the one per cent offer, which lowers the monthly payments but increases the time the loan is paid back.
The buyer pays a down-payment of around 20 per cent and then pays one per cent of the total price monthly until they own it 100 per cent.
If it's a Dh1 million ($272,000) property, the down-payment would be Dh200,000 with a monthly payment of Dh10,000, spread over a period of 80 months – or six years and eight months.
It looks more attractive to a buyer than the heftier payment terms of 20 per cent on booking, 30 per cent by handover, and the remaining 50 per cent within three years of handover.
Danube Properties, which claims to have been the first to offer the one per cent payment in the UAE, said the plan has helped buyers "with limited income buy homes".
However, as developers tend to use property sales to finance projects, the plan requires a lot more upfront funding.
"This has helped our properties increase their appeal to end users who used to live in rented homes," said Rizwan Sajan, founder and chairman of Danube Group.
"In order to achieve this one per cent monthly payment scheme, we had to endure a lot of financial pain, as we had to keep on paying the contractors on time, partly from the buyers' paid amount and sometimes either from our pocket or from bank finance.
"Anything lower than this will be difficult for developers, unless they are already cash-rich and can develop projects with own resources."
He said the plan reduces the buyers' burden of paying a hefty amount upfront.
"We usually deliver homes after 36 months of the customer payments, including the initial down payment of about 20 per cent," he said.
"After moving in, the homebuyers can enjoy their homes while the balance 40-50 per cent remain unpaid and we as a developer collect the remaining amount from them in the process."
One of the newer payment enticements is offered by Dugasta Properties, which offers a 100 per cent buy-back option after five years on its Al Haseen Residences project in Dubai Industrial City, close to Al Maktoum International Airport.
The properties, which start at Dh342,000 for a studio and Dh1,023,000 for a two-bedroom apartment, also come with a 50 per cent guaranteed return in five years and no service charges during that time.
Attractive plans
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The Palm Jumeirah saw the majority of deals in luxury and super luxury sales in Dubai in 2023. AFP -
At 450m, the Franck Muller Aeternitas tower will be one of the tallest in the city when complete in 2027. It will feature 649 one, two and three-bedroom apartments, plus duplexes, over 106 floors – all topped by a giant clock. Photo: London Gate -
Bayz 101 by Danube will have 1,346 apartments and is the developer's largest project to date in terms of both units and overall space. Photo: Danube Properties -
Sharjah property developer Arada has launched sales for its luxury project in Dubai, the Armani Beach Residences at Palm Jumeirah. Prices start at Dh21 million ($5.7m). Photo: Arada -
Designed by Japanese Pritzker-Prize-winning architect Tadao Ando, in collaboration with fashion icon Giorgio Armani, Armani Beach Residences features 53 two to five-bedroom residences, plus penthouses and two presidential suites. Photo: Arada -
One of the largest private penthouses in Dubai is on sale for Dh600 million. It comprises the three top-three levels and rooftop of Raffles The Palm Dubai Residences. Photo: Emerald Palace Group -
Dubai's AHS Properties has launched a $850 million project called Casa Canal, located at Dubai Water Canal. Photo: AHS Properties -
Casa Canal will have a mix of residences, including three-bedroom penthouses, four and five-bedroom villas and six-bedroom mansions. Units are priced between Dh22.5 million and Dh185 million and the project is set to be delivered in late 2025. Photo: AHS Properties -
Nakheel, the developer behind The Palm Jumeirah, launched the first waterfront villa project on the Palm Jebel Ali in 2023. Leslie Pableo / The National -
The launch of properties on four fronds of Palm Jebel Ali offer two types of homes – coral and beach villas, says Nakheel. Photo: Nakheel -
Dubai developer Sankari Properties is building a $1 billion ultra-luxury project in Marasi Business Bay. Units will start at $10 million. Photo: Sankari Properties -
Damac launched Cavalli Couture on Dubai Water Canal in 2022. The 14-storey building features 70 units, comprising three, four and five-bedroom duplex sky villas and duplex penthouses. Photo: Damac -
Jumeirah Bay Island is one of Dubai's prime residential neighbourhoods. Photo: Bulgari -
There were close to 50 sales of Jumeirah Bay Island properties in excess of $10 million in 2023. -
Also much sought-after is The Mansions, Lanai Islands, Tilal Al Ghaf, Dubai. Photo: Knight Frank -
A luxury villa in Dubai's Emirates Hills sold for Dh102.8 million in 2022. Photo: Phoenix Homes
Lewis Allsopp, chairman of Allsopp & Allsopp Group, said the resurgence of attractive payment plans is a positive development for the market.
"It serves as a catalyst for potential buyers who are on the verge of making a purchase but may face affordability constraints," he said.
"Developers are providing these buyers with the chance to invest in the Dubai marketplace through accessible and budget-friendly payment plans.
"Many individuals typically need to accumulate a 20 per cent or 30 per cent deposit before being able to make a purchase.
"However, with the option to invest and save gradually, it becomes simpler to enter the property market, especially when prices are rising. This presents a fantastic investment opportunity."
George Barker, senior sales consultant at Betterhomes, said while the payment plans "enhance the ease and affordability of purchasing for buyers", the main beneficiaries are often those "with significant liquidity or multiple assets".
"First-time buyers in the region, particularly from the expat community, are predominantly opting for some form of financing to facilitate their entry into the real estate market," he said.
Mr Barker said the resurgence of attractive payment plans in the Dubai market reflects the surge in developments being launched.
"While payment plans and similar enticements have always been part of the landscape, the current market showcases heightened competitiveness and affordability in these offerings," he added.
"The lowered mortgage rates have further increased affordability for everyday buyers, prompting significant responses from large developers."
Betterhomes said that, despite higher interest rates, 2023 saw an increase in owner-occupiers buying properties due to soaring rents, because of a sharp increase in the population.
"Betterhomes noted a substantial shift towards domestic demand, with buyers identifying as end users increasing from 38 per cent to 44 per cent," it said in the report.
"This movement towards end-user home ownership is a great sign of the maturing nature of the market and should give confidence to greater price stability in the years to come."
Mr Barker said high rents are "nudging potential buyers to consider the option of purchasing a property rather than continuing to pay elevated rents".
"The consistent trajectory of the rental market, unyielding even post-Covid, and the projected 20 per cent increase in 2024 in prime residential areas of Dubai, further amplify this trend," he said.
"If you're a resident who hasn't considered exploring property ownership in Dubai, you're certainly in the minority."
