Market AnalysisMarch 5, 20163 min read

Developer Incentives: Real Value or Marketing?

Fee waivers, guaranteed returns and free furniture are common offers. How to tell which incentives add real value and which hide higher prices.

David Thompson

Chief Economist

PhD from London School of Economics. David's macroeconomic forecasts have guided institutional investors through three market cycles in the Gulf region.

With demand quieter, developers are using incentives to attract buyers. Common offers include waived registration fees, free service charges for a period, furniture packages and guaranteed rental returns. Some incentives provide genuine value; others simply disguise a higher price.

Common incentives

Registration fee waivers: the developer pays some or all of the 4% fee.
Service charge holidays: no charges for one or more years.
Furniture packages: furnished units ready to rent.
Guaranteed returns: a fixed rental yield for a period.

How to evaluate them

Compare the total price, including incentives, with similar properties without incentives. A fee waiver on an overpriced unit may still leave the buyer worse off.

Guaranteed returns

Guaranteed returns can be attractive, but buyers should understand who guarantees them, for how long and what happens afterwards. The guarantee may be built into the price.

Legal considerations

Ensure that incentives are written into the sale agreement. Verbal promises are difficult to enforce.

When incentives make sense

Incentives can be valuable when they reduce real costs on a fairly priced property from a strong developer.

Calculating the real value of an offer

Buyers can compare developer offers by converting every incentive into a cash value and subtracting it from the price. A waived 4% transfer fee on a one-million-dirham apartment is worth forty thousand dirhams. Two years of service charges at fifteen thousand dirhams a year are worth thirty thousand. A furniture package may be worth less than its advertised value if the buyer would have chosen different items. Once incentives are deducted, the net price can be compared with similar completed homes and with other launches. This calculation often reveals that a project with fewer incentives but a lower base price is the better deal, and it prevents marketing from obscuring value.