In an effort to ensure timely delivery and avoid cancellations, developers in Dubai are implementing innovative payment plans that secure early and substantial funding from buyers. This approach has significantly accelerated project completion rates, with some developers boasting early handovers.
Industry insiders reveal that developers often require around 40% of the payment from buyers within the first year of an off-plan project launch, and up to 50% within 14 months. This rapid influx of cash allows projects to progress swiftly, reducing the risk of delays or cancellations.
Farooq Syed, CEO of Springfield Properties, highlighted the financial health of developers due to these attractive payment plans. “For instance, a major developer collects 40% of the payment within the first year and 50% within 14 months, even when construction is only 10% complete. This strong cash flow ensures timely project completion, with very low chances of delays or cancellations in the near future,” Syed explained.
Developers such as Danube Properties, Imtiaz Developments, and Binghatti Developers have already announced the early completion of several projects, underscoring their robust financial positions. Some projects have been handed over six to eight months ahead of schedule, demonstrating the effectiveness of these payment strategies.
The current property market in Dubai has seen unprecedented growth post-pandemic, driven by high demand from both residents and foreign investors. This boom has prompted developers to adopt flexible payment plans aimed at maintaining a steady cash flow and attracting a diverse range of buyers, particularly in affordable areas.
Sijo Jose, team leader at Betterhomes, noted the aggressive payment terms in recent developments, with some requiring 80% during construction and 20% on handover, or even 90:10 terms. These plans ensure continuous cash flow, aiding financial management and ongoing projects.
Ramjee Iyer, chairman and managing director of Acube Developments, confirmed that developers are employing flexible payment schedules to stay competitive. “While aggressive payment plans boost sales and attract buyers, they also help manage cash flow and ensure steady revenue over time. This strategy makes properties more accessible to a wider range of buyers, increasing sales volume and market share,” Iyer said.
However, Iyer cautioned that these plans come with potential downsides. Delayed revenue collection can strain developers’ finances, requiring robust planning to sustain operations. There’s also a higher risk of buyer defaults, leading to legal and administrative costs. Additionally, the success of these plans depends on the economic environment and market demand; adverse conditions could impact buyers’ ability to make payments.
On the positive side, aggressive payment plans lower the financial barrier for first-time homebuyers, making properties more affordable and boosting sales. These plans also enhance a developer’s competitive edge and can attract additional investment by demonstrating demand and financial viability.
Overall, the implementation of flexible and aggressive payment plans has proven beneficial for both developers and buyers in Dubai’s thriving property market. While these strategies help maintain high demand and ensure project completion, careful financial planning remains essential to mitigate potential risks.
