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. These payment plans make acquiring a property more accessible to the buyers. So, let’s understand the payment plans that make off-plan properties more attractive.

Traditional Off-plan Property Payment Plans

A down payment is the initial step for any off-plan payment plan. It varies from developer to developer but usually ranges from 10% to 20% of the property's value. Developers may ask for an excessive down payment for high-end properties.

The most common off-plan property payment plans used by the developers are:

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:

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

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.

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.

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 gives buyers time to get their finances in order and keep some cash on hand for other needs.

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

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.

Frequently Asked Questions

• Can a developer make changes to the off-plan property payment plans?

  It depends on the developer's reputation. Although developers avoid this practice, some may introduce small tweaks to the payment schedules.

• How long does an off-plan payment plan last?

  An off-plan payment plan usually lasts three to five years but may face delays due to regulatory approvals or supply chain issues.

• What happens if I am unable to make payments?

  In these instances, it is best to talk to the developer, as they can provide a customised payment plan or waive off the plenty for late payments.

• Why do different developers offer different payment plans?

  Developers usually introduce their payment plans depending on the project's popularity and the current state of the real estate market. For example, post-handover payment plans are less likely to be introduced when the market is busy or booming.

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. 

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