Developers will factor in VAT rebate and extend benefits.
Dubai: Dubai’s developers are likely to get even more generous with their offers as they compete to reduce the unsold stock on their books. And unlike in other sectors, the introduction of VAT (value added tax) is not going to impact on developer plans.
In fact, VAT could even be a marketing advantage with off-plan launches. “Introduction of VAT is likely to set off more favourable payment plans from developers,” said Faisal Durrani, Cluttons’ Head of Research. “Simply because of the tax rebates available to developers and the fact that VAT kicks in only three years after completion of development.” (As things stand now, residential off-plan sales are believed to be exempt from VAT.) But the fact is that in the last six months or so, developers here have already been quite generous, many of them waiving registration fees, allowing for a lower payment upfront and the bulk of the instalments to be made after handover.
Developers are also stretching the number of years after handover in which those payments can be made. Two years was the norm and that is slowly inching up to five years and even longer.
According to Durrani, it should be on the post-handover payment period that developers will focus further. Five years and more could even become the norm. “As such, extended post-handover payment schemes would be a permanent feature of the property market,” said Durrani. “People sense that the Dubai residential realty is nearing the bottom of the current cycle.
“We don’t think oversupply is going to be an issue in Dubai … as long as the government’s target of doubling the population by 2030 is met.”
Next year could be one for recovery in Dubai
With property values in Dubai stabilising or even inching away from the bottom, 2018 could be when the process starts to pick up pace. But any future gain need not be an immediate spike — “2018 is likely to see values starting to show their first positive, albeit weak growth, in over three years as the “Expo effect” starts to influence demand levels and overall sentiment,” says the new Cluttons report. But for this year, the consultancy however sees a citywide dip of 4-5 per cent.
But Abu Dhabi’s residential space is unlikely to see any immediate turnaround. “The weaker overall sentiment prevailing in the market, combined with lower rates of job creation, are expected to limit the sales market’s ability to stabilise, at least during 2017,” the report says. “So while investors remain in a holding pattern and institutional funds struggle to nd substantive investment opportunities, we expect capital values to end 2017 5-7 per cent lower than 2016."
Source: Gulf News
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