By Staff Reporter
Some banks in the UAE are offering 10 per cent additional financing for off-plan properties where the construction stage of the project has reached at least 50 per cent.
Industry insiders suggest that lenders are offering these facilities to property buyers in off-plan projects of renowned and established developers in Dubai, as banks don’t necessarily view real estate as an opportunity, but sometimes look at it as a liability.
“Some lenders started offering enhanced financing options for off-plan properties, allowing buyers to secure up to 10 per cent additional financing during the construction phase, supplementing the standard mortgage amount due upon completion. This additional funding is typically available for projects with at least 50 per cent construction progress, ensuring a degree of risk mitigation for the lender,” according to real estate consultancy Asteco.
“This move not only stimulates the off-plan market but also broadens accessibility to potential buyers,” it said in its second-quarter 2024 report.
Traditionally, banks offered 50 per cent financing while buyers would have to contribute the remaining half.
“The market’s underlying fundamentals remain strong, supported by high levels of equity in the real estate market, continued economic growth, infrastructure development and a growing population,” it said.
Industry insiders say that lenders offer financing in projects of ‘Tier 1’ developers and only in the approved projects of big developers that have a long track record of delivering projects.
As reported by Khaleej Times earlier, most of the projects are flush with cash as they have introduced payment plans that allow them to collect up to half of payments within 14 months of the launch of the project. This ensures that developers have plenty of funds at their disposal and the project will be completed on schedule, if not early. These payments are mainly introduced to some of the Tier 1 developers in the emirate.
Promotional gifts
The off-plan property market continued to maintain remarkable momentum, with both local and international investors eagerly acquiring newly launched units, attracted by the promise of strong returns on investment in a tax-friendly environment.
However, competition is growing among property developers as the market has seen the entry of some new foreign developers to cash in on high demand and high returns. Therefore, some of them are offering flexible payment plans and gifts to attract and grab the attention of local and foreign buyers.
“It is worth noting a rise in the number of developers offering sales incentives, such as lower down payments, flexible and/or extended payment plans and promotional gifts,” Asteco analysts said.
The off-plan property sector is booming, comprising 60 per cent of total transactions in July 2024, up from 49 per cent in July 2023. This surge underscores the increasing popularity and potential of off-plan investments in Dubai.
The second quarter saw buoyant sales, driven by ongoing project launches that fuel off-plan transactional activity. The last quarter recorded a 2 per cent growth in average sales prices, however, several areas such as Jumeirah Village and Business Bay experienced above-average sales price growth.
“In addition to the general increase in demand, this can be attributed in part to a significant rise in both off-plan launches and newly completed developments. These new projects often feature superior quality compared to earlier ones in these areas and are priced accordingly,” Asteco added.
According to Bayut, the off-plan market has been thriving like never before, showing promising signs of growth. With approximately 48,000 new units being launched during the first half of 2024, demand remains high with the influx of new residents continuing to rise.
Farooq Syed, CEO of Springfield Properties, said the surge in off-plan property sales in the first half of 2024 highlights Dubai’s strategic importance as a global investment hub.
“Looking ahead, we project sustained growth in off-plan sales in the second half of 2024, driven by new project launches and ongoing market momentum. The positive market trajectory and investor confidence indicate a thriving real estate environment, offering unparalleled opportunities for both local and international investors,” he said.
Source: Gulf News
