The Dh220 million Gardenia project launched by the Shaikhani Group for its Jumeirah Village South project / Image Credit: Shaikhani Group
Post-handover payment plans in Dubai are now being stretched to 10 years. And even longer, as the length of payment periods turn into one of the key sales tools developers are deploying to close a deal.
For its Dh220 million Jumeirah Village South project, the Shaikhani Group plans to offer a package where 50 per cent of the instalments can be made after the handover. And this is the portion that can be stretched up to 10 years. ”But our banks have said they might be willing to even consider 15 years based on the buyer’s portfolio,” said Mohammad Shaikhani, Managing Director. ”I don’t think too many developers are having 10-year terms. The way to get buyers interested is to ease their monthly expenses. Being creative on the handover terms does just that.”
Indeed, 10 years are, as of now, the exception. The median post-handover period is currently between five to seven years, as developers realize this is the ideal way to pull in end-users. Or even investors who do not have the ready cash to plonk down on a new real estate acquisition.
And rentals can take care of the instalments once the handover is done. ”For instance, on a Dh1 million project, let’s assume 50 per cent is being paid up after handover on a 10-year instalment,” Shaikhani said. ”Renting out the property can easily generate Dh65,000-Dh75,000 a year as against the Dh50,000 instalment the owner has to make.”
The developer said it did not plan to subsidise the monthly interest rate payment to banks, which currently averages 3.5-4.5 per cent. That will be the purview of the bank and the buyer, it added.
The Shaikhani Group — formerly known as Memon — unveiled its development plan for the next nine years, which will see it pump Dh2 billion into mid-tier projects in Jumeirah Village South, Arjan and Dubai South (formerly Dubai World Central).
”Apart from Dubai South, we have paid-up plots in the other areas,” the executive said. ”The idea is to target locations where the land cost would be between Dh100 and Dh200 a square foot and where our projects can be sold for Dh700-Dh1,000. That’s our sweet spot.
”Our long-term strategy is to build up a portfolio in and around the Expo 2020 venue. The Dh2 billion spending will take us there.”
It comes on top of a Dh1.5 billion project spend, which includes those in Silicon Oasis and Sports City. The five projects have gone past the 90 per cent construction stage and ready for handover this year.
”Once these are done, we can start with the plot purchases in Dubai South,” Shaikhani said. ”Plus, with the handovers of completed projects, we will have the cash to commit to future ventures. The market’s going to get busy in the mid-tier space.”
The Group has extensive real estate interests in Karachi and Islamabad in Pakistan as well as a rubber insulation plant in Ajman.