Risks to consider when buying a post handover payment plan (PHPP)

Consider the motivation behind a developer’s decision to introduce a postponed payment option. Could it be a strategic move aimed at enhancing their competitive edge, especially if the property they’re offering lacks distinctive features?

Title Ownership and Risk:

Owners will only receive the title deed upon complete payment. If your financial situation prevents you from making the installments, you may face heavy penalties. Furthermore, the developer can even cancel the sale, and keep all the money you have paid so far.

Developer Reliability and Completion Risk:

Consider both the developer’s reliability and the completion risk associated with post handover payment plans. If the developer encounters financial issues due to such plans, your project might face indefinite delays, leaving your investment in limbo. Assess whether the developer possesses the financial strength to complete the building, especially in the event of a market downturn. If payments are insufficient to cover construction costs during a correction, your investment could remain stuck indefinitely.

Payment Plans are Non-transferable:

If you’re an investor considering selling the unit upon handover for a profit, you won’t be able to transfer the payment plan to the next buyer.

A PHPP Annual Payment will Seldom be Covered from Rent:

If you buy an AED 1,000,000 property with 60% to be paid after handover over 4 years, your annual payment will be AED 150,000. It’s likely that you will pay approximately AED 75,000 from pocket annually after rental adjustment.

A Better Way to Buy:

Choose a developer who believes in their product and does not resort to PHPP gimmicks. If you can afford the annual outflow of a PHPP, it is almost certain that you will be eligible for a mortgage on handover. With the same example of an AED 1,000,000 purchase, a mortgage would actually put money in your pocket every year.At Vantage Properties we have an exclusive partnership with Huspy to provide you a mortgage preapproval on your off-plan purchase at the time of booking your unit. Buyers can enjoy up to 60% payment from the bank on handover when buying a property with us.