The real estate sector in Dubai has certainly come a long way in recent years. Attracting investors from all over the world, the United Arab Emirates promises a high return on investment and extremely favourable living conditions. But most people find it difficult to make a 100% down payment when buying a property in Dubai. This is why the trend of buying property on instalments is widely adopted.
Development companies offer their buyers attractive interest-free instalment programs (“Payment plans”) that really work in favour of investors and buyers. The instalment schedule basically determines the number of instalments to be paid in a fixed period of time and also the amount to be paid in each instalment when buying a property in Dubai. Not every project comes with the same payment plan, even if it is developed by the same developer. It is therefore important to make the right choice and consult with an experienced advisor.
The most common payment plans for buying property in Dubai
Post-handover payment plans
Post-handover payment, as the name suggests, allows the buyer to make a payment after the property in Dubai is handed over to him. However, they are still required to pay a certain percentage of the total price before they can own the said property. Post-handover payment plans, which were introduced in late 2013, were mostly offered for larger projects. However, the popularity of this payment plan led to private developers jumping on the bandwagon.
This type of payment plan is usually aimed at investors looking for real estate in Dubai. It offers them great convenience as they can take over the property after the handover and rent it out. They will use the rental income to pay the remaining amount. The fact that the ROI in Dubai is higher and so is the rental income has contributed to the success of this payment plan. End-users (buyers) also prefer this payment plan as it allows them to settle into the property they have purchased and manage the rest of the payment conveniently.
Payments 10/90
It can be called another, more aggressive form of payment plan. Developers usually offer this for “Off plan” properties in Dubai. As the name suggests, 10% of the total value of the Dubai property is to be deposited initially as a deposit, while the remaining 90% is paid in instalments.
It is a relatively new payment plan that is preferred by buyers and investors alike. It offers them a safe and convenient way to buy real estate in Dubai or add more listings to their inventory, or Those who are short on cash can opt for a developer that comes with such payment plans and book the property under their name.
Payment in instalments until delivery
The most common payment plans are divided into percentages paid at various stages of project construction until handover. For example, if you have an 80:20 payment plan, you will pay 80% in instalments during construction until handover and the remaining 20% after completion when you hand over the property. In some cases, the repayment schedule is extended by another 2-4 years after the transfer.
This kind of payment plan can often be seen in the following ratios: 10:90, 20:80, 40:60, 50:50, 60:40, 70:30, etc. These are not fixed ratios; they are determined by the developer.
Rent for own payments
It is a very popular payment method in many countries. The rent payment plan is aimed at end users and is only available for move-in ready properties. It is more suitable for buyers who do not have sufficient cash to pay for a property in Dubai upfront.
According to this plan, a lease agreement is signed between the lessor and the lessee for a period of X years. The annual rent in this instalment plan is higher compared to the market price. Under this agreement, the lessor will become the buyer of the said property in Dubai if both parties fulfil the terms of the agreement.
This method allows the landlord to use the rent money as a down payment on the purchase of the property. It is possible to obtain a mortgage for the remaining amount through banks or private lenders.