Dubai plot owners 'taking development route'

Real estate investors in Dubai, UAE, are opting to develop land plots rather than wait for a return to lucrative sales profits in a market no longer dominated by speculators. This significant market shift was highlighted at Cityscape Global today (September 12) by Firas Al Msaddi, the chief executive of fäm Properties, one of Dubai’s largest real estate brokerages. “Between 2010-2013 in prime Dubai areas, trading plots was one of the most lucrative real estate investments,” remarked Al Msaddi. "But in the last three years, plot prices reached optimum level, killing opportunities to buy and sell for profit in the short and medium term," he stated. "As re-sale transactions dropped drastically, more and more plot owners have taken the decision to develop their land, many encouraged by the offer of completed infrastructure in prime areas of such as Downtown, Business Bay and Dubai Marina," he added. Figures from the Dubai Statistics Center show a major increase in the number of new multi-storey building permits issued over the last three years - 1,368 compared with just 674 between 2010-13 - and fäm Properties expects a boom in demand for its land development advisory services to continue. “Plot owners opting to develop a project on their land are finding that many banks have a good appetite to finance construction, provided the plot is fully paid up and there are healthy financials,” said Al Msaddi. At the peak of the boom in land trading before 2014, prime areas such as Downtown, Business Bay and Dubai Marina were the most lucrative, said the expert. Al Msaddi said G+18++ plots launched by Dubai Properties in Downtown during 2010-11 for Dh195 per sq ft climbed to Dh240 per sq ft on GFA (gross floor area). The same plots also fetched Dh350-400 per sq ft in the secondary market. “They have to keep in mind that profit margin is low should they to inject full equity and sell when ready. But there is a decent ROI (return on investment) and IRR (internal rate of return) to be generated if they plan their bank funding and off-plan sales well,” he remarked. “Those with holding power for two years but no development expertise can look for a joint venture with a credible developer or seek a development management company with a proven record in A to Z land advisory,” he noted. “But few investors were purchasing plots to develop, and short-term price increase for plots attracted many aiming to re-sell for a decent profit margin,” stated Al Msaddi. The change of investment strategy by plot owners reflects a broader shift away from speculation in Dubai real estate