Some developers are coming up with payment plans which ensure that projects are not cancelled and delivered ahead of time.
Industry executives say that some developers take around 40 per cent of payment from the buyers within a year of the launch of an off-plan project and up to 50 per cent within 14 months. As a result, developers are flush with cash which ensures that projects are moving very quickly towards completion and getting handed over ahead of time.
However, some developers are also very flexible in terms of their payment plans and aim for steady cash flow from investors. These payment plans are targeted more in affordable areas.
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In the post-pandemic period, Dubai property market has seen a massive growth across all the segments due to unprecedented demand from residents and foreign investors.
Farooq Syed, CEO of Springfield Properties, said developers are pretty cash-rich due to attractive payment plans.
“For example, a major developer takes around 40 per cent of the payment within the first year of the plan and 50 per cent within 14 months of the launch of the project. But the construction has not even reached 10 per cent. This means the funds flow is strong and will ensure the construction of the project on time. There will be no project delays or cancellations in the next few years,” said Syed.
“As the current property cycle is peaking, developers are collecting more money to avoid default. If the buyer has paid 40 per cent at the very initial stage of development, there is a very high likelihood of the project reaching its completion even if the market sees a slowdown in the next couple of years. Now default chances are very low and construction is taking place at a very fast pace and projects are being handed over prior to the completion date,” he added.
Some of the developers such as Danube Properties, Imtiaz Developments and Binghtti Developers have announced the completion of their projects ahead of their schedule, reflecting the strong financial strength of the developers.
“Some of the projects are getting handed over six to eight months ahead of their completion schedule,” Syed said, adding that there is a very strong demand for some of the projects launched by the top developers, that around 2,000 units were sold within days.
Sijo Jose, team leader at Betterhomes, said there have been aggressive payment terms of recent developments, such as 80 per cent during construction and 20 per cent on handover, or even 90:10 terms.
Flexible payment plans
Ramjee Iyer, chairman and managing director of Acube Developments, also confirmed that developers are really aggressive in their payment plans, implementing flexible payment schedules as they fight for the attention of buyers. This is clearly part of a broader strategy to maintain high demand and attract a diverse range of buyers, including both investors and end-users.
“While aggressive payment plans are designed to attract buyers and boost sales, they don’t necessarily mean that developers are cash-rich. These plans can sometimes be a strategy to manage cash flow and ensure steady revenue over time. By offering extended payment plans, developers can maintain a steady cash flow over several years, aiding in financial management and ongoing projects. Aggressive payment plans increase market competitiveness by making properties more accessible to a broader range of buyers, thus boosting sales volume and market share,” he said.
Developers often rely on a mix of their own funds, bank loans, and investor capital; extended payment plans can secure more buyers, attracting additional investment and financing options. The overall economic environment, including interest rates and market demand, also significantly impacts developers’ financial health.
Pros and cons
On the positive side, Ramjee Iyer said aggressive payment plans increase accessibility by making properties more affordable to a broader range of buyers and lowering the financial barrier for first-time homebuyers. “This attracts more buyers, boosting sales volume and appealing to both end-users and investors. It ensures a steady stream of income over time, helping developers manage finances and fund projects.
Additionally, he said these plans enhance the developer’s competitive edge, potentially increasing market share, and can attract additional investment by demonstrating demand and financial viability.
On the flip side, Acube Developments chairman said delayed revenue collection can strain developers’ finances, requiring robust planning to sustain operations. There’s also a higher risk of buyers defaulting on payments, leading to potential legal and administrative costs.
“The success of these plans depends on the economic environment and market demand; adverse conditions can affect buyers’ ability to make payments. Importantly, aggressive payment plans might drive down perceived property values and affect long-term price stability,” he added.