If you're looking to invest in Dubai real estate, you’ve probably come across 1% monthly payment plans from developers like Expo City, Damac, and Danube. These offers seem like an easy way to own property without bank approvals or high upfront costs. But are they as good as they sound? Let’s break it down.
How 1% Payment Plans Work
- Down Payment: 15-20% upfront + 4% DLD property registration fee.
- Monthly Instalments (Pre-Handover): 1% of the property price for about four years.
- Post-Handover: Remaining 30-40% paid in 1% monthly instalments over 3-5 years, interest-free.
Example: Buying a 1-Bedroom in Expo City
- Property Price: AED 1.8 Million
- Monthly Instalments (Pre-Handover): AED 18,000
- Post-Handover Costs (Including Service Fees): AED 19,250
- Estimated Rental Income: AED 9,166 (Based on AED 110,000 annual rent)
- Net Monthly Cost: AED 10,084
- Potential ROI After 8 Years: Around 6%
Why Developers Offer 1% Plans
- Attract More Buyers: Makes property ownership accessible without mortgages.
- Islamic Finance Appeal: No interest (riba), aligning with halal investment principles.
- No Mortgage Approvals Needed: Ideal for those who don’t qualify for bank financing.
- Steady Cash Flow for Developers: Ensures continuous funding during construction.
The Hidden Cost: Are They Really Interest-Free?
While these plans don’t have direct interest, developers often increase property prices by about 20% to cover the extended payment period. That means if you’re hoping for capital appreciation, your profit margin will be lower since you’re already paying a premium upfront.
Better for Long-Term Holding, Not Quick Flips
If you’re buying a 1% plan property, don’t expect fast appreciation—you’re paying a higher price from the start. But if you hold the property for 8+ years, you can sell and reinvest in a better home once it’s fully paid off.
Who Should Avoid 1% Plans?
- Cash Buyers: You might get a better deal by negotiating on a near-completion or ready property.
- Short-Term Investors: If you plan to flip the property quickly, the premium price might eat into your profit.
- Buyers Seeking High Appreciation: Traditional financing or outright purchase can offer better growth potential.
Is a 1% Plan Right for You?
- Can you afford the payments? You’ll need at least AED 35,000 - 50,000 monthly income to cover instalments, living costs, and service fees.
- Are you investing for rental income? 1% plans work well for long-term rental yields, not short-term gains.
- Have you compared all costs? While bank mortgages have interest, a 25-year mortgage at 4.5% per year adds up, making the total cost higher over time.
Final Verdict: A Case-by-Case Decision
1% plans can be a good entry point if you want to avoid mortgages for religious reasons like halal investing, or invest for rental income, or plan to hold the property long-term. However, you are paying around 20% more than a standard purchase. That means capital appreciation will be lower, so think long-term before committing.
Need Help Deciding? Let’s Talk.
Every investor’s situation is unique. I’ll help you analyze whether a 1% plan fits your financial goals—or if there’s a better option for you. Reach out for a free consultation today! Let’s make it happen.