Developers offer discounts for early payments

Union Properties says it had offered buyers 10 per cent off the balance of what they owe on their units.

Property developers are offering incentives to existing buyers to ensure cash flow in a slowing market, executives and analysts say. Union Properties, the Dubai-based developer, has offered buyers a 10 per cent discount on the balance of their outstanding payments, a company official said yesterday. "This was implemented on all Union Properties developments," said Michael Jackson, the company's chief marketing officer. "It was offered to all clients that had a remaining balance on their unit, as a prompt-payment incentive ? Given the current situation that everyone is now facing, we felt this was a fair and worthy incentive for all our purchasers to finalise their property purchase," added Mr Jackson. Chet Riley, an analyst at Nomura Securities in Dubai, said more of these incentives were inevitable as developers tried to help buyers while banks were not lending. "The global liquidity crisis is hitting these companies," Mr Riley said. "In order to clear their books and clear their own refinancing issues, they are trying to grease the wheels of the financing chain." Nakheel, the developer of the Palm Jumeirah, said yesterday it was allowing buyers at the Trump International Hotel and Tower to transfer their purchases to other buildings in its portfolio, in a move that analysts said was to increase cash flow. "We have advised our customers that we will move forward with Trump International Hotel and Tower, Dubai, within 12 months, by which time we expect to be in a more favourable economic environment," a Nakheel spokeswoman said. "We remain dedicated to this remarkable collaborative project and are focused on building what we know will be one of the most iconic buildings in the region. "Given the known delay, we have, however, given our customers the choice of relocating their investments elsewhere within Nakheel's current portfolio of properties if they so wish." Several investors, who declined to give their names because they are negotiating with Nakheel, said the company was not adjusting prices for these transfers to reflect changes in demand in the market. "I'd rather default than pay over market price," an investor said. Dubai's property economy is entering what is likely to be its most challenging year because of the global crisis. Landmark Advisory, a market research firm, said in a report yesterday that Dubai apartment prices would drop by an average of 20 per cent this year. "2009 will be characterised by the transition from a supply-driven property market to a demand-driven one," the report said. "Prices are no longer dictated by developers facing rapidly rising construction costs and frenzied speculators at any price. In the year ahead, consumer preferences, access to capital and income levels will reshape demand patterns and ultimately redefine the real estate market." As early as November, companies began trying to revive sales as the market sagged. Emaar Properties, the largest developer in the region, was among the first to announce schemes to enable buyers to afford a home at a time when bank financing was becoming more restricted. Under the "Plan to Own" option, Emaar said it would provide a 25 per cent "bridge loan" to help buyers afford down payments required by home finance providers. The buyer would then pay back the loan over five years. The second option, the "Rent to Own" programme, will allow tenants to contribute 100 per cent of their rental payments for a year towards buying the property if they decide to purchase it within 10 months of living in it. Union Properties announced a similar scheme. But sales remain sluggish across the market and developers are squeezed. Emaar said yesterday it would not pay a dividend for last year after posting a Dh1.77 billion (US$482 million) loss in the fourth quarter because of writedowns on its 2006 purchase of John Laing Homes, a US home builder. The company paid a dividend of 20 per cent of the nominal share value in 2007. Developer incentives are also starting to emerge in Abu Dhabi. Bloom Properties, an Abu Dhabi-based developer, said this month it was lowering prices in a key project, Bloom Gardens, and the discounts would extend to buyers who had already purchased a villa in the project last year. Arady, an Abu Dhabi-based private equity group focusing on the property sector, said last week it would cut prices at The Helix towers on Reem Island by about 20 per cent to pass on savings from lower construction costs. The three largest developers in Abu Dhabi - Aldar Properties, Sorouh Real Estate and Tourism Development and Investment Company - have been more protected against the slowdown in sales and lack of mortgages because of a new home finance company created late last year. The companies, along with Mubadala Development and Abu Dhabi Commercial Bank, created Abu Dhabi Finance last November to provide home financing for their developments. [e-mail] [e-mail]