Thursday, April 15, 2010

More GCC developers offering extended payment plans to investors

While real estate firms in Dubai are offering incentives and payment solutions to their investors, the GCC developers are offering extended payment plans for settlement of handover amount, said property analysts in Dubai.

The Head of Research and Consultancy at CBRE (CB Richard and Ellis) Middle East, Mathew Green, said that few GCC developers in the region are offering investors extension on final payment due to developers between 9 and 12 months.

There have been few innovative payment plan options among GCC nations, wherein the final payments have been split over a period of nine months to one year, post completion. This offers investors additional comfort to know if they will be in occupation before making the final payments. However, this option has not been much in use in the UAE, Green said.

For few developments, such a payment plan had been in offer since the launch of the product, and the developers have turned out to be financial models, he said.

Moreover, prudent firms with better access to capital will be well positioned to complete their projects, despite high risk of failure on the part of investors towards making timely payments, Green pointed out.

Developers too have been found to be more flexible so as to avoid defaulting units, and have offered investors additional time to make their payments. Basically developers are seeking to lessen risk in the present environment and do not want to draw back liability in the form of defaulted units, Green said.

Green said that increased transparency and better assurances from developers are the need of the hour, to re-build investor confidence. Investors at the final payment stage are actually looking at factors such as the units being tenantable in terms of utilities connections and necessary road infrastructure.

Few smaller developers in Dubai and several projects launched in the Northern Emirates have actually maintained larger proportion of up to 40 percent of payment for the final stage, and this may be a major hurdle in achieving actual project completion, as investors are hesitant to make payments on a property which could now reflect considerable negative equity for them, Green pointed out.

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