Dubai property market sees rise in '1% monthly' plans.

Post by : Dr. Amrinder Pal Singh

Image credit-Gulf News

In the ever-evolving landscape of Dubai's real estate market in 2024, a significant trend is emerging – the widespread adoption of the '1 per cent monthly' payment plan. This novel approach, previously more common in off-plan developments, is now making its way into even villa projects. The allure of this payment structure lies in its potential to ease the financial burden on buyers, allowing them to spread their payments over time, a departure from the conventional lump-sum payments of 10-20 per cent every three months.

Developers are recognizing the appeal of the 1 per cent payment plan, viewing it as a strategic tool to attract end-user buyers in a market that has witnessed remarkable demand-driven growth over the past three years. The shift towards more affordable and flexible payment plans reflects a changing dynamic in Dubai's real estate landscape, where end-users are becoming increasingly pivotal for the next phase of market development.

According to industry insiders, the traditional selling patterns observed by major master-developers like Emaar, Nakheel, Meraas, and Aldar might not be sustainable for all players in the market. Many developers are now adopting innovative approaches to stand out amid the competitive off-plan launches, with the 1 per cent monthly plan being regarded as a particularly effective strategy.

Danube, as the pioneer of the 1 per cent plan in Dubai, has maintained this approach across all its developments. The strategy has proven successful, highlighting the significance of adapting to evolving market demands. This payment plan not only serves as an attractive proposition for buyers but also addresses the challenges posed by a tightening mortgage market, where interest rates are rising and accessibility to home loans is becoming more stringent.

For potential buyers, the 1 per cent monthly plan offers a more manageable entry point, providing better visibility into their funding needs, especially when considering potential mortgage requirements for the remaining payments. With mortgage rates hovering around 5 per cent and above, end-users are feeling the squeeze, further emphasizing the importance of affordable and flexible payment options.

In response to these market dynamics, developers are revising their upfront payment requirements, some lowering them to as low as 5 per cent. Additionally, they are extending payment periods, with Expo City's latest releases offering up to 8 years for certain units. This extended payment timeline aligns with the expected handover date in early 2026, a crucial factor in meeting the demands of end-user buyers.

The emphasis on timely completion has become a key selling point for developers aiming to distinguish themselves in a market flooded with off-plan launches. Meeting promises of on-time delivery is considered a significant advantage, especially in a market where end-users prioritize timely possession of their properties.

As the Dubai property market continues its trajectory into 2024, there are indications of a diverse range of offerings. While high-profile launches and mega penthouse deals dominated 2023, recent announcements have showcased projects with starting prices ranging from a highly accessible Dh850,000 to Dh1.2 million. These developments, with built-up areas appealing to both end-users and investors looking to rent out properties, signify a broadening market focus.

Among the noteworthy projects is one by Samana in the Al Barari area, offering starting prices below Dh1 million and featuring the 1 per cent payment plan. This combination of affordability and flexible payment options reflects a strategic approach to cater to the evolving needs of buyers in a market where pricing and payment flexibility are becoming increasingly crucial.

However, developers now face new challenges, as unsold units beyond a certain timeframe come with corporate tax obligations. This factor adds a layer of complexity to project management, requiring careful consideration by developers to navigate potential tax liabilities associated with unsold inventory. Despite these challenges, the market is witnessing continued interest and investment in areas such as Ras Al Khaimah, particularly around the landmark Wynn hotel, which is still under development.

According to industry experts, Ras Al Khaimah is poised to become an investor magnet in 2024, with multiple off-plan projects launched in proximity to the Wynn hotel. The high visibility of the Wynn hotel project is expected to positively impact the wider property market in the emirate, leading to potential pricing fluctuations and increased activity in the coming years.

In conclusion, Dubai's property market in 2024 is marked by a paradigm shift in payment plans, with the 1 per cent monthly option gaining prominence across various projects. Developers are adapting to changing buyer dynamics, offering affordable entry points and flexible payment structures to attract end-users. The market's continued growth, coupled with challenges like tax obligations on unsold units, underscores the need for agility and innovation within the real estate sector. As Dubai navigates these shifts, the role of end-users and their evolving preferences will play a crucial role in shaping the future trajectory of the real estate market.