Instalment plans for real estate in Dubai: profitable schemes with examples

Foreigners can buy real estate in Dubai in instalments with a 10% down payment. Instalment plans can be combined with mortgages; moreover, you can get a residence permit in the UAE, even if the instalment plan has not yet been paid off. In this article, we will analyse the most profitable investment schemes associated with instalments.

Instalments in Dubai for both under construction and ready-made housing

There are two most common types of instalment plans in Dubai’s property market. These plans differ in terms of payment schedules and down payment amount:

• For ready-made housing from the developer, the practice of rent-to-own is quite common: first you rent the property, and then you buy it out. In this case, the instalment plan is essentially a lease agreement subject to change of ownership. Rent payments are charged above market rates. When the full payment under the contract is repaid with rental payments, the ownership rights to the property are transferred to the tenant.

• Instalment plans for housing under construction are arranged differently: 50–70% of the cost is distributed according to the payment schedule during the construction stage, and the remaining amount is paid only after the property is put into operation. Payments are proportional to the project’s stage of completion.

An example of a payment schedule in this year’s project under construction (Jumeirah Village Circle residential complex):

The project’s stage of completion is not determined by the developer’s reports, but is approved by the state inspection. Stage-of-construction payments help investors monitor compliance with the construction plan and further protect them from development risks.

Currently, in the primary real estate market in Dubai, these risks for end buyers are minimised at the legislative level due to stringent requirements for developers. Prior to construction and sales, developers must deposit a significant part of the project cost into a special account, the funds on which are blocked by the regulator until the project is 50% ready. This means that developers are risking their own capital, not investors’ money.

Instalments are easy to arrange, and payments are protected by the regulator

Any developer in Dubai will offer instalment plans with payment schedules varying from project to project. The investor only needs to agree on payment options and choose a schedule; the developer’s representative will prepare all the documents.

Investor payments are protected by both the bank and the regulator. Developers can only apply for instalments through banks approved by the Dubai Land Department. These banks, in turn, transfer payments to the developer’s account only after checking the project’s stage of completion through the regulatory authorities.

Favourable combination of instalments and mortgage

Mortgages in the UAE banks can be issued for ready-made or close to completion projects.

Most UAE banks agree to a mortgage when the project is 80% ready. The amount of the project cost covered by mortgages for foreigners usually does not exceed 50%. So the last instalment payments, up to 50% of the cost, can be made on credit.

Ksenia Kolesnikova Tranio’s manager in Dubai

Foreigners can apply for a mortgage in Dubai if they have a local bank account and a residence permit.

UAE residence permit for buyers of property in instalments

Even if you buy property in instalments, you are eligible to apply for a 3-year UAE residence visa, which grants a status similar to a residence permit. To do this, the following conditions must be met:

• at least $205,000 of the property cost has already been paid;
• payments made are at least 50% of the property cost;
• the property is put into operation.

Now let’s combine a residence visa, an instalment plan and a mortgage. The scheme with minimal costs can be as follows:

Step 1. Choose a project worth at least 410,000 US dollars.

Step 2. Arrange an instalment plan with a payment schedule similar to this: at least 50% of the cost is paid before construction is completed, the rest is paid after.

Step 3. Pay at least 205,000 US dollars before the project is put into operation.

Step 4. Get a residence visa.

Step 5. Apply for a mortgage on the remaining 50% of the cost or pay the rest of the instalment plan from your own funds.

When applying for a residence visa, additional documents will be required; they can be prepared by the developer’s representatives or Tranio’s lawyers.

If an investor pays in full for a property worth more than 545,000 US dollars, they are eligible to apply for a 10-year Golden visa.

In the spring of 2022, none of our clients chose instalments, everyone tried to invest as much as possible. Now instalment plans are becoming popular once again, especially among those who cannot quickly withdraw money from other assets. Some people specifically choose projects that will not be completed any time soon so that the instalments last longer.

Elena Milishenkova Tranio’s Chief Commercial Officer

Investment income using instalments

As the completion of the project approaches, the cost per square metre in the project increases for new investors. Due to this, investment income in the primary property market in Dubai can be received even before the project is put into operation, and the instalment plan provides a low entry threshold.

Let’s take a closer look at this scheme using the case of one of our clients as an example. The investor chose an apartment in Dubai worth about 300,000 US dollars at an early stage of construction and arranged an instalment plan with a 10% down payment. Our client plans to contribute another 20% of the cost as the project is built, pay a 4% fee to the Land Department, and then sell it under a cession agreement to another investor. Thus, our client will only invest 102,000 US dollars of his own funds out of the initial cost of 300,000 US dollars, and will profit from the total cost of the project, which will rise in price by the time of sale.

Instalments in Dubai: highlights

• Instalments are easy to arrange with most developers in Dubai.
• From 50% to 70% of the property cost is paid before the construction’s completion, the rest is paid after.
• The down payment is from 10% of the cost.
• It is possible to issue both an instalment plan and a mortgage for the same project.
• A residence visa or a residence permit can be issued when buying a property in instalments, if the project is put into operation and at least 50% of the cost in the amount of $205,000 or more has been paid.