Dubai’s real estate market is renowned for its dynamic and investor-friendly environment and one of the unique aspects of buying property in Dubai is the availability of flexible payment plans for new build properties. Payment plans make it easier for buyers to invest in property as they don’t have to pay the full amount upfront.
We’ve put together a comprehensive guide on how these payment plans typically work.
What is a payment plan?
A payment plan is an agreement between the developer and the buyer whereby the payment for the property is spread over a certain period of time. The payment schedule is usually linked to the construction milestones or period following completion of the property.
What are the different types of payment plan?
Construction-Linked Payment Plan (CLPP)
In a CLPP agreement, payments are made at various stages of the construction. This usually involves the buyer making an initial deposit payment, followed by further instalments as the property construction progresses.
An example of this would be a 10% deposit, 10% upon completion of the foundations, 10% at the next stage etc.
Post-Handover Payment Plan (PHPP)
A PHPP allows the buyer to pay a large proportion of the property price after the property is handed over to them and could range from 1 to 5 years post-handover.
An example of this would be a 50% payment made during construction then the remaining 50% over 3 years post-handover either in instalments or in one go.
In either scenario, the deposit payment varies and can be between 5% to 20% of the property value. It is usually paid at the time of signing the sales agreement.
Where payments are linked to specific stages of construction (eg. completion of the foundations, structural completion, finishing etc), the developers will provide a detailed schedule outlining these milestones to the buyer, so they know what to expect.
Where payments are made post-handover, the balance is paid in instalments over a set period of time, after the property is handed over to its new owner.
Payment plans offer financial flexibility and reduce the immediate financial burden on the buyer, offering affordability by spreading out the financial load, and making it easier for buyers to invest. They also offer flexibility with various plans available to suit different financial situations and preferences as well as being attractive to property investors who are looking to maximise returns with a minimal initial deposit.
Payment plans are most commonly available for off-plan properties (new build properties), but some ready-to-move-in properties also offer flexible payment options. Developers often also offer additional incentives to buyers such as waiving registration fees or providing furniture packages.
As a buyer looking to take advantage of the availability of payment plans in Dubai, you can expect to go through the following process:
- Select a reputable developer with a track record of delivering quality projects on time.
- Choose the property that fits your budget and preferences.
- Understand the payment structure on offer including deposits, milestone payments, and post-handover instalments.
- Ensure all terms, including the payment schedule, are clearly outlined in the contract and sign the sales agreement. It is important to note that missing a payment can result in penalties, interest charges, or even the cancellation of the sales agreement. These terms will be detailed in this document.
- Follow the agreed-upon payment schedule, making sure payments are made on time to avoid any penalties.
- Upon completion, inspect the property and take possession after ensuring it meets the agreed specifications.
The most important considerations to take into account are:
- Research the developer’s past projects and their adherence to timelines to ensure they are reputable
- Thoroughly read and understand the sales agreement
- Ensure you have a clear financial plan to meet all payment obligations
- Stay informed about market trends and property values in Dubai to ensure you choose the best property for your needs
If your circumstances change, and you wish to sell the property before completing the payment plan, it will depend on the developer’s policies and the terms of your contract. Some developers allow resale under certain conditions.
Overall, buying a new build property in Dubai with a payment plan can be an advantageous way to invest in property and offer you flexibility and financial reassurance. By understanding how these plans work and carefully selecting a reputable developer, you can make a well-informed investment decision that aligns with your financial goals.
