All You Need to Know About Payment Plans for Off-Plan Properties

Off-plan properties refer to pre-construction or pre-launch properties that developers sell before construction. They are becoming popular in Dubai due to their potential for capital appreciation, cheaper costs and handsome rental yields. However, one prominent reason behind the popularity of off-plan properties in Dubai is the easy and diverse payment plans. But here’s the thing: payment plans make or break the deal. Get it right, and you will have a smooth, affordable path to ownership. Get it wrong, and you might face cash flow problems or even lose your investment. So, how do payment plans work? Which ones are the best? And what should you watch out for? Let’s break it all down.

How Payment Plans Work for Off-Plan Properties

When you buy off-plan, you pay for a property that is still under construction. Developers offer different payment structures to make it easier for buyers to manage costs over time. Here are the most common types:

Traditional Payment Plans

80/20 Payment Plan

In 80/20 payment plans, buyers pay 80% of the property's price during the project's construction phase. The remaining 20% is paid upon completion and handover of the project. The 80/20 payment plan is the most common one used by developers in Dubai. In such a plan, two common methods for payment are:

Construction-Linked

Buyers pay according to the project's development stage using this payment method. The progress of the construction determines the percentage of each instalment. A construction-linked payment plan would look like this:

10% at the time of booking

20% after the completion of the grey structure

20% after flooring 

20% after installation of internal fittings

20% after 80% completion of the building

10% upon possession

It is best for buyers who prefer spreading payments over the build period.

Time-Linked Payment Plan

Buyers follow a fixed-date payment structure in the time-linked payment plan. Payments are made monthly or quarterly, regardless of the project's construction progress. Suppose the property price is AED 1,000,000. The project has a four-year payment plan and a 20% down payment. The remaining amount, AED 800,000, will be paid over the next 48 months with a monthly instalment of AED 16,667.

The developer does not offer discounts on such plans, but sometimes, it waives any surcharges due to late payments.

60/40 Payment Plan

In a 60/40 payment plan, buyers pay 60% of the property's price during the construction phase and 40% upon completion and handover of the project.

50/50 Payment Plan

A 50/50 off-plan property payment plan allows buyers to make half of the payment during construction and half at handover time. This type of plan is often used for premium properties or high-end developments in Dubai, where the developer is confident of the project’s value post-completion.

Deferred Payment Plan

This payment plan allows you to postpone a portion of the property's cost to a later date, usually after the property has been finished. It is an agreement where a buyer and seller agree that the full purchase price of a property will not be paid immediately but at a later date or in instalments. 

• The purchaser pays a down payment or advance, and the balance is postponed.
• The deferred payment is generally repaid in instalments or through a lump sum payment in the future.
• The agreement outlines the terms upon which the payment is deferred, such as the period of payments, interest incurred (if any), and penalties for late payment.

Post-Handover Plans

Post-handover payment plans have recently gained popularity among investors and buyers. They are an innovative addition to the payment plans to attract buyers. An example of a post-handover payment plan is:

30% payment made during the construction phase

40% payment made at the handover of the property

30% payment made in easy monthly instalments over the next two or three years

Rent-to-Own Payment Plan

Some developers offer a rent-to-own plan, where you pay rent for the property while it's being constructed, and part of the rent is credited toward the purchase price. Such an option provides flexibility and lets buyers get a feel for the property and location before committing to the full purchase. Rent-to-own payment plans can have higher overall costs than traditional financing, so always carefully review the terms. 

Advantages of Off-Plan Payment Plans

The benefits of acquiring a property through off-plan payment plans are:

• The prices are low because the project is still under development.
• Instead of paying a lump sum amount, buyers can pay for easy instalments.
• Buyers can choose their desired property floor plan at an economical price since the project is in the initial stages.
• Developers sometimes offer incentives or discounts to attract more buyers, such as registration fees or service charge waivers.

How to Choose the Best Payment Plan?

Choosing the best payment plan depends on your financial capacity, investment goals, and the timeline for owning the property. Here are a few things to consider when selecting a payment plan:

Your Financial Situation: If you have enough liquidity to make a larger upfront payment, a plan that offers discounts for early payments might be beneficial.

Investment Horizon: If you plan to resell the property or rent it out after completion, a plan that allows you to pay after handover could be more convenient.

Developer’s Track Record: Choose a reputable developer who has delivered projects on time and with quality.

Conclusion

Payment plans are designed to attract buyers, and post-handover plans are especially effective because they give buyers more time and flexibility to make payments. However, traditional payment plans are common in a busy market like Dubai, where property prices are rising and there are many buyers. Still, post-handover plans are becoming more challenging to find. Developers don't see a need to offer them because of the high demand. 

The right payment plan can make all the difference, and we are here to help you secure the best deal. Contact us now to explore the best deals and find the ideal off-plan property for you!

You can check these Top 5 new projects with the best post-handover payment plans.