Buying a house is a dream for many and, at the same time, a nightmare. Saving for a down payment, acquiring a mortgage, and locating the perfect property are no easy feats.
However, what if owning a home with only 1% monthly payments was possible? Does that sound too good to be true? To begin with, it’s not in Dubai where some developers are giving this enticing payment plan for their properties.
In this blog post, we will discuss the 1% payment plan, how it works, and why buying luxury property in Dubai can be a good idea. Let’s get started!
What is a 1% payment plan?
The 1% payment plan enables you to buy a house in Dubai, paying only 1% monthly of total price. This implies that you don’t need a huge upfront payment, and there are no high-interest rates or charges.
You only pay 1% of the property monthly until you own it 100%. For instance, when you buy a million-dirham property, you can be required to pay 10k dirham per month for 100 months, which is approximately eight years. Much better than paying 25% (AED 250,000) and a 3% mortgage interest rate per month (AED 3,735) on a 25-year mortgage.
How does the 1% payment plan operate?
Some developers in Dubai offer a 1% payment plan to increase the number of buyers and investors interested in their projects. They normally partner with a bank or a financial institution that funds buying. Typically, Danube Properties offers a convenient 1% payment plan for its off-plan projects. The latest addition to their residential lineup is Diamondz by danube, located in Jumeirah Lake Tower* , where you can also take advantage of the 1% payment plan.
A buyer signs a contract with the developer and the bank stating they will pay 1% of the ownership monthly. Once the buyers pay 50 % of the property’s price, they also acquire the title deed; this gives them a better sense of security and flexibility. However this percentage can vary builder to builder. Some property builders apply 25 to 30 percent for title deeds.
Unlike in a Rent-to-Own situation where one pays rent for some time and then buys the property, in a 1% payment plan, you pay 1% of the total house price per month. The 1% payment plan makes you buy luxury property in Dubai from day one, paying a monthly amount towards the purchase price, not rent.
Calculating The 1% Rule
The 1% rule can be easily calculated. Simply multiply the purchase price of the property by 1%. Place the comma of the purchase price to the right, two lines. You should charge at least what the result indicates as monthly rent.
You will also want to add the cost of any repairs needed to the house’s price and multiply the house price by 1%.
What is so good about a 1% payment plan?
The 1% payment plan has many benefits for buyers who want to buy a property in Dubai, such as
Affordable
It is only one percent of the monthly property price, much less than Dubai’s average rent and mortgage payment. It also saves you interest and closing fees because you pay the property off faster than a conventional mortgage. This opens new investment opportunities in Dubai in the real estate sector.
Flexible
There are many properties and locations that you can choose from depending on what your budget and lifestyle allow. Additionally, you can sell or lease your property, provided you clear the balance with a developer and the bank.
Security
Once you pay 50% of the price, you get the title deeds, giving you full ownership, and you can use it as collateral for other loans or investments. Secondly, you don’t need to bother about the developer getting broke and delaying the completion of the project as you will deal with the bank funding the purchase.
What are the Disadvantages of the 1% Payment Scheme?
Though the 1% payment plan has benefits, it also has disadvantages. Some of the potential challenges are:
It’s limited
However, not all developers provide the 1% payment plan, and not all properties qualify. Depending on the availability and demand of 1% payment plan projects, you might need to settle for a smaller, lower quality, or less convenient location.
Risky
An unfinished property always has associated risks, including delays, defaults, or disputes. Additionally, you need to trust the developer and the bank because they have made some promises and commitments that are binding to you.
It’s not guaranteed
The 1% payment plan is subject to approval from the developer, the bank, your credit history, and your income. You may need to submit additional documents, such as bank statements, salary slips, or proof of residence, to qualify for this plan. Additionally, you may have to pay other fees, such as a booking fee, registration fee, and transfer fee.
When The 1% Rule Works
The 1% rule works best when:
- The property is stable or increasing, and the rental income and the property’s value go upward with time. Thus, the investor earns positive cash flow and capital appreciation.
- The property must be located in a high-demand area or in top residential areas in Dubai with low vacancy rates, and the quality of tenants is high. This minimizes loss of money in case of vacancies, evictions, and damages.
- The property is in good shape and only needs minor repairs or refurbishment. This reduces costs and increases the net operating income of the property.
- It must have a low-interest rate and amortization period. This brings down the monthly mortgage payment. Thus, the cash flow is increased.
For example, an investor buys a property for AED 734,000. The property rents for AED 9,175 per month and requires no repairs. The investor obtains a 30-year fixed-rate mortgage at 3% interest, with a monthly payment of AED 3,089. The investor also pays AED 1,101 per month for property taxes, insurance, and maintenance. The net operating income of the property is AED 8,074. The cash flow of the property is AED 4,985. The property passes the 1% rule in realestate and has a high cash-on-cash return of 16.28%.
When The 1% Rule Doesn’t Work
The 1% rule doesn’t work well when:
- Property in an unstable or declining market with low rented value and property value. Consequently, this investor is exposed to risks of negative cash flow and capital loss.
- This area is under-demanded and has a high vacancy rate and low tenant quality. This increases the risk of vacancies, evictions, or damage, which may lead to lost income.
- The property is bad and needs major repair or maintenance. This will increase the costs and reduce the property’s net operating income.
- It uses a high-interest rate and a short amortization period. This raises the monthly mortgage and reduces cash flow.
For example, let’s say an investor buys a property for AED 367,000 in a distressed neighborhood, where the average rent is AED 3,670 per month. The property is in bad shape and requires AED 73,400 worth of repairs. The investor obtains a 15-year fixed-rate mortgage at 6% interest, with a monthly payment of AED 3,089. The investor also pays AED 734 monthly for property taxes, insurance, and maintenance. The net operating income of the property is AED 3,670 – AED 734 = AED 2,936. The property’s cash flow is AED 2,936 – AED 3,089 = -AED 153. The property barely passes the 1% rule, as the rent is 1% of the purchase price plus repairs. However, the property has a negative cash flow and a low cash-on-cash return of 2.28%, calculated as ((AED 2,936 x 12) – (AED 3,089 x 12)) / (AED 73,400 down payment + AED 73,400 repairs).
What properties are 1% payable in Dubai?
Dubai offers many property buying options using the 1% payment plan. Some of the most popular and reputable developers that provide the 1% payment plan are
Danube Properties.
Danube, a leading developer in Dubai, offers affordable yet quality projects. Some properties that provide the 1% payment plan include Danube Eleganz, Elz, Lawnz, Resortz, and Bayz in Arjan, International City, Al Furjan , and Business Bay . These properties present studio, one-bedroom, and two-bedroom apartments for sale for AED 290,000.
Damac Properties
Damac Properties also offers 1% payment plans that allow buyers to pay over an extended period while living in their dream house. With respected buildings across prime areas, Damac houses offer great choices for home buyers in Dubai.
Damac Canal Heights at Business Bay - Studios, 1 & 2 bedroom homes starting from AED 1.25M. An attractive payment plan of 20% downpayment and 1% monthly installments will be available until handover.
Damac Canal Heights 2 at Business Bay - Studios, 1, 2, 3 & 4 bedroom homes and houses starting from AED 1.23M. The payment plan includes a 20% downpayment and 1% monthly payments.
Canal Crown at Business Bay by Damac - Studios, 1 & 2-bed homes and 3 & 4-bed houses starting from AED 1.12M. 20% down payment with 1% monthly installments until finish.
Morocco at Damac Lagoons - 1, 2 & 3 bedroom flats starting from AED 2.9M found in Damac Lagoons. 20% downpayment and 1% monthly installments.
Safa Two at Safa Park - Studios, 1, 2 & 3-bed homes by Damac in twin towers facing Safa Park. Prices start from AED 750,000 with a 20% downpayment and 1% monthly installments for the length of the building.
Azizi Developments
Azizi is a popular developer in Dubai specializing in creating stylish and modern communities. Some properties of Azizi Venice also offer 1% payment plans. Studio, one-bedroom, and two-bedroom apartments are available for AED 450,000.
The 1% Rule And Other Investment Rules In Real Estate
| Payment Plan | Description | Advantages | Disadvantages |
|---|---|---|---|
| 1% Payment Plan | 1% of the property value every month until the full amount is paid off. This can take up to 8.3 years. | 1% of the property value every month until the full amount is paid off. This can take up to 8.3 years. | – Longer payment period – Higher total cost – No rental income until full payment – Risk of default or delay |
| Post-Handover Payment Plan | The buyer pays a certain percentage of the property value as a down payment and the rest after the property is handed over. The post-handover period can range from 3 to 10 years. | – Deferred payment after possession – Possibility of rental income to pay off the balance – No interest or hidden charges – Suitable for end-users and short-term investors | – Higher down payment – Higher total cost – Risk of delay or cancellation of the project – Limited availability of projects |
| During Construction and On Handover Payment Plan | The buyer pays a certain percentage of the property value as a booking fee and the rest in instalments during the construction phase and on handover. The instalments are usually linked to the construction progress. | – Lower booking fee – Lower total cost – Possibility of capital appreciation – Suitable for end-users and short-term investors | – Higher monthly instalments – Interest or hidden charges may apply – Risk of delay or cancellation of the project – No rental income until handover |
| Rent-to-Own Payment Plan | The buyer rents the property for a fixed period and then has the option to buy it at a predetermined price. The rent paid during the period is deducted from the purchase price. | – No down payment – No interest or hidden charges – Possibility of testing the property before buying | – Higher rent than market rate – Higher purchase price than market value – Limited availability of projects – No capital appreciation |
As you can see, the 1% payment plan is the cheapest and most convenient since your payments are lower and you become an owner within 8.6 years. Yet, there are some constraints; the company only deals with selected projects and some specific developers, and you will not necessarily get the best property you desire in the most appropriate neighborhoods.
Other payment plans provide more choice but have relatively high deposit requirements, interest rates, and fees. Therefore, as you choose the right payment plan, consider your budget, needs, and future growth plans. A luxury real estate agency in Dubai is another alternative to get Dubai’s best deals and properties.
Factors to Consider
While lowering the entry barrier, there are still factors buyers need to account for in budgets and financial planning when using the 1% payment plan:
Monthly Mortgage Payments – Ensure the payment (including taxes and insurance) can be covered by rental income if an investment property.
Maintenance and Repair Costs – Maintain a separate repair fund to pay for inevitable maintenance, repairs, and replacements over time.
Property Appreciation is Not Guaranteed – Value increases are not a given. Research neighborhood trends and do due diligence on property specifics.
Rental Vacancies – Adequate reserves are needed to cover periods when units are unoccupied between tenants.
Property Management Fees – Outsourcing management will incur additional monthly costs.
Interest Rates Can Change Over Time – Ensure qualification if rates increase drastically over the 30-year term.
Conclusion
The 1% payment plan has revolutionized the real estate industry by making the initial costs of buying a home more manageable. For homeowners and investors alike, it removes one of the largest obstacles to building long-term wealth through property. Although requiring diligent financial planning, this innovative financing structure has expanded access and opportunities for many more people to enjoy the benefits of real estate ownership in Dubai. With smart research and budgeting, the 1% rule continues to empower new buyers and investors globally.
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