Calculators / Property
Off-Plan Payment Plan IRR
A developer offering sixty forty on a three year build and one offering a post-handover plan over four years are quoting the same number and charging you two different prices. Money you pay later costs you less, because the money you keep is earning. This discounts every instalment back to today.
Your numbers
Plan A
Plan B
Result
The discount rate is what your money would earn elsewhere. Use your realistic alternative, not a hopeful one. A rate of zero makes both plans identical, which is exactly the mistake this calculator exists to prevent.
Read the rule, the arithmetic and the honest list of where this breaks.
Open the playbookQuestions people ask
Why compare payment plans at all if the price is the same?
Because a dirham paid in four years is not a dirham paid today. If your money can earn six percent elsewhere, an instalment due in four years costs you about seventy nine percent of its face value in today's money. Two plans at the same headline price can differ by ten percent or more in real cost.
What discount rate should I use?
What your money would realistically earn if you did not hand it to the developer. For most people that is a cash or bond rate, not a hoped-for equity return. Using a high rate flatters back-loaded plans, so be conservative or you will talk yourself into the wrong plan.
Is a post-handover plan always better?
In present value terms it usually is, and that is why developers charge for it, often through a higher headline price on that plan. Compare the plans at their actual headline prices, not at a single price, and the advantage frequently shrinks or disappears.
What does this calculator not include?
Handover-date risk, which is the real risk in off-plan. It also excludes the service charges that start at handover whether or not you have a tenant, the leasing lag before first rent, and the possibility that the market price at handover is below your purchase price. Those belong in a separate stress test.
Investments Playbook publishes educational research and general information. Nothing on this site is personal investment advice, a solicitation, or a recommendation to buy or sell any asset. Property and securities can fall in value. Past performance does not predict future returns. Figures shown are indicative and may be delayed. Always take regulated professional advice before acting.
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