Certain banks in the UAE are providing an extra 10 percent financing for off-plan properties where the construction phase has reached at least 50 percent completion. Industry experts believe that financial institutions are extending these facilities to buyers of off-plan projects from reputable and well-established developers in Dubai, as banks often consider real estate more as a liability than an opportunity.
"Some lenders have begun offering improved financing options for off-plan properties, enabling buyers to obtain up to 10 percent additional financing during the construction phase, augmenting the standard mortgage amount payable upon completion. This extra funding is generally accessible for projects that have achieved at least 50 percent construction progress, thereby reducing the risk for the lender," according to real estate consultancy Asteco.
"This initiative not only invigorates the off-plan market but also enhances accessibility for potential buyers," stated in its second-quarter 2024 report. Historically, banks provided 50 percent financing with buyers covering the other half.
"The market's underlying fundamentals remain robust, supported by high levels of equity in the real estate market, sustained economic growth, infrastructure development, and a growing population," it added. Industry insiders note that lenders finance projects from 'Tier 1' developers and only in approved projects of major developers with a proven track record.
As previously reported by Khaleej Times, most projects are well-funded as they implement payment plans allowing them to collect up to half of payments within 14 months of project launch. This ensures developers have ample funds and the project will be completed on time, if not earlier. These payment plans are primarily introduced by some of the Tier 1 developers in the emirate.
The off-plan property market continues to exhibit strong momentum, with both local and international investors actively acquiring newly launched units, drawn by the prospect of substantial returns in a tax-friendly environment. However, competition is intensifying among property developers as new foreign developers enter the market to capitalize on high demand and returns. Consequently, some are offering flexible payment plans and gifts to attract local and foreign buyers.
"It is noteworthy that an increasing number of developers are providing sales incentives, such as reduced down payments, flexible and/or extended payment plans, and promotional gifts," Asteco analysts commented. The off-plan property sector is flourishing, accounting for 60 percent of total transactions in July 2024, up from 49 percent in July 2023. This increase highlights the growing appeal and potential of off-plan investments in Dubai.
The second quarter witnessed robust sales, fueled by continuous project launches that stimulate off-plan transactional activity. The last quarter saw a 2 percent increase in average sales prices, with several areas like Jumeirah Village and Business Bay experiencing above-average sales price growth.
"In addition to the overall rise in demand, this can be partly attributed to a significant increase in both off-plan launches and newly completed developments. These new projects often offer superior quality compared to earlier ones in these areas and are priced accordingly," Asteco noted. According to Bayut, the off-plan market is thriving, displaying strong signs of growth. With approximately 48,000 new units 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, stated that the surge in off-plan property sales in the first half of 2024 underscores Dubai's strategic importance as a global investment hub. "Looking ahead, we anticipate continued 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 point to a thriving real estate environment, offering unparalleled opportunities for both local and international investors," he said.
