By Aroonim Bhuyan, IANS,
Dubai : With banks curbing loans in the face of the global financial crisis and real estate agents finding it difficult to get customers, property developers in this West Asian metropolis are wooing potential home buyers with lucrative payment options.
Majors like Emaar, Union Properties (UP) and ETA Star are offering innovative payment schemes like rent-to-own to long-term payment plan after handover even as a new survey found that over 50 percent of real estate agents in Dubai could not conclude a single deal in the last one month.
The Dubai-based UP has become the latest to offer flexible payment options like renting, owning and renting to own in some of its select properties here.
“UP initially introduced the rent-to-own scheme over four years ago to support the sales at the first Green Community project,” UP’s chief property officer Lesley Sayle said while announcing the relaunching of the scheme.
“It was a plan that was successful and by reintroducing the rent-to-own scheme, we are giving residents and businesses the flexibility to plan for their homes and office space,” she added.
Under the scheme, a customer can rent a property in a select UP project for one to two years. Then, if the client decides to buy the property, the rent for the one or two years that has been paid is converted into a down payment followed by a regular instalment payment plan.
According to Sayle, around 98 percent of UP’s rent-to-own tenants have converted their option and become owners.
Though Sayle said her company has not relaunched the scheme because of cancellations or mortgage defaults, the fact remains that the scheme may very well tempt investors still seeking property in Dubai after banks cut down home loan amounts up to 50-60 percent of the total property value.
Last week, one of the United Arab Emirates’ (UAE) top developers, Emaar Properties that has major investments in India, too came up with a similar scheme with two options – ‘Plan-to-Own’ and ‘Rent-to-Own’.
Under the ‘Plan-to-Own’ option, a buyer can have the flexibility to pay 25 percent of the property price after the handover and over five years.
This would make it possible to bridge the current gap due to lower loan to value ratios offered by banks and financial institutions, according to the company.
Emaar will help potential home owners and commercial customers who can qualify for a mortgage through a bank to bridge the gap by extending their payment plans.
The extended payment plan of up to 25 percent of the property value will be paid back by the customer in single annual instalments for five years, with the first payment beginning only one year after possession.
Under the ‘Rent-to-Own’ option, buyers can first rent a property in one of Emaar’s upscale projects and then decide whether to purchase it.
Tenants can adjust 100 percent of the first year’s rents as home finance if they decide to purchase the property within 10 months of living in the home, Emaar stated while announcing the new scheme.
The property price will remain fixed for a period of one year, and customers will also have the option of acquiring the ‘Plan-to-Own’ programme if they decide to buy.
During the rent period, tenants will have the first right to buy the property and those who do not wish to buy can still have the option of renewing the tenancy.
“The ‘Plan-to-Own’ and ‘Rent-to-Own’ programmes are aimed at further strengthening the property sector by facilitating easier purchases and making property more affordable for our customers,” Emaar’s chief executve Issam Galadari said.
“By providing customers the option of securing up to 25 percent extended payment option, Emaar is stepping in to support our customers,” he said.
Meanwhile, ETA Star Property Developers, part of the ETA-Ascon Star Group, is making plans to offer tailor-made payment plans for customers of its properties.
“We hold on to some units in our projects, which we generally sell on completion,” Shyam Sunder, general manager for marketing at ETA Star, told the Emirates Business 24-7 daily.
“However, this time around we are open on offering easy payment terms to buyers. We will sit across with them and work out a solution that benefits both of us,” he said.
The companies are coming up with these plans even as a new survey by a real estate website said property agents here believe the fall in demand for property was due to bank curbs on loans.
At the same time, they believe the property market here will pick up in six months.
“The survey revealed that 77 percent of Dubai real estate agents believe the market will pick up within six months. This is surprising given that more than 50 percent of respondents have concluded no sales at all in the last month,” said Paul Allen, webmaster of TheEstateAgentsDubai.com that conducted the survey.
“Many agents believe the lack of lending from banks and a self-perpetuating panic are chiefly responsible for the current situation,” he added.
According to Allen, other reasons like the need for more regulation by the Real Estate Regulatory Authority, clear information regarding new laws and procedures from the Land Department, the global financial crisis, the end of the perceived Dubai property bubble and an uneducated market have also led to the fall in property demand.
“Six months ago, it was possible to obtain 80-85 percent mortgages on property, now many banks are down to 50-60 percent and agents feel this has caused a seizure in the market,” he said.