Finance options to buy an off-plan property were earlier limited
“Neither a borrower nor a lender be, for loan oft loses both itself and friend,” Polonius counsels his son Laertes in Hamlet regarding borrowing or lending money to a friend. The good news for buyers in Qatar is that you don’t need to borrow money from a friend to purchase real estate as there are many options currently available to purchasers who don’t have the money in full to pay for the property. In the immediate aftermath of the Global Financial Crisis (GFC) in 2008, there was only one way to purchase a property in Qatar. That was to pay the full price when the property was completed. Although there were a few options where you could buy a property off-plan, these were all but gone within a year, and you could only buy by paying the full purchase price. For a few years in the wake of the GFC, banks were very reluctant to lend against property due to tighter liquidity levels within the banking system. However, things have changed for the better now.
What are some of the main options available?
- Mortgage from your bank: Although terms and conditions will vary from bank to bank, in general you can borrow up to 70 percent of the purchase price from your bank for a loan up to 25 years, or age 65, whichever comes first. This is the most standard way to finance the purchase of a property and a long payment plan allows you to lower your monthly payments, often allowing you to purchase a property for a monthly amount that may be similar or even lower if you were to rent a similar property.
- Developer payment plans: This is a new feature that has come to the market over the last three years and is an excellent alternative to a traditional mortgage for people who either cannot or do not wish to pay the full amount at once or not able to raise finance from a bank. These developer plans come in three different models:
- Off-plan finance – While a property is being built, the buyer pays a certain amount each month or quarter with a view to having the property paid in full to coincide with the completion of the property. The biggest benefit here is that a bank is not required. However, there can be concerns that large amounts of money have been invested without the property being handed over.
- Post-completion payment – Instead of the property being under construction, the property is already finished. In this case, the developer allows the buyer to pay for the property over a period of time, often between three to five years. The major benefit in this scenario is that the property is completed. There is no handover risk and the buyer knows exactly what they are getting.
- Hybrid model – A number of developers are now offering a hybrid model where part of the payment is made during the off-plan period
- Lease-to-own programme – This is another form of a developer-provided payment plan, but is very unique relative to other plans. In this scenario, a “buyer” agrees to rent the property for, say, a period of three years and at the end of that period, buys the property, with a large percentage of the rent paid used to purchase the unit. During those three years, the amount of money allocated toward the purchase helps a lot of buyers with the down payment required to buy the unit, and the rest of the purchase price is often bought through a standard mortgage. There are many benefits to utilising this programme, and the biggest benefit is that it provides people who do not have down payment funds today to have an opportunity to buy a property in the future.
These are some of the options that are available. We at NelsonPark Property would be happy to sit down with any potential buyer and review the options available to find out the payment plan that best suits them.
This article was published as part of the fourth edition of Property Finder Qatar’s Trends Report