Dubai property sector less susceptible to gyrations

DUBAI — Dubai's property sector is in the early stages of the boom and is less susceptible to wild cyclical gyrations compared to elsewhere in the world, said Adel Ahmed Lootah, executive director, Dubai Property Group.

By Babu Das Augustine

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Published: Thu 17 Feb 2005, 9:23 AM

Last updated: Thu 2 Apr 2015, 4:25 PM

Addressing the members of the India Club and the Indian Business and Professional Council (IBPC) yesterday, Lootah said that property investments can go wrong only when the economy under performs or speculators push up the market to unreasonable levels. According to him both these situations do not apply in the case of Dubai.

“The economy is booming with the government taking the lead role in all sectors such as infrastructure, property development and service sectors followed by the active participation of semi government organisations and the private sector. Dubai has followed a win-win model for both public and private sector for the past 40 years and the government leads by example,” he said.

Warning the investors about the adverse effects of speculative investments, he said, the investment motive should be owning a house and the long-term appreciation of the asset (property) rather than the gains from the short-term premium on properties existing in the market.

More than Dh30 billion worth property is projected to be released in the Dubai market in the next 3 years. While the property sector sold Dh7 billion worth property, Dh4 billion was financed through mortgage channel. Currently, the market has premium levels ranging from 10 to 30 per cent.

“The current premium levels are not too high compared to those existing in other markets. However the rents are very steep with 7 to 8 per cent of the property as rental revenue per annum,” said Sanjay Sharma, chief operating officer of Tamweel.

Rents are expected to remain high up to a point in time when market is leveraged enough to find alternate source of finance. “Until now the developments are fully paid for with almost nil leverage. As and when the sector is leveraged the rents are bound to come down,” Lootah said.

Addressing the concerns on investors on Federal Law on land title transfer, he said the law is in the pipeline and until the law comes into effect the developer gives an undertaking that the title will be transferred to the owner when the law is enacted. Commenting on the arbitrary increase of building maintenance charges by some builders, Lootah said such issues will corrected by the market as the market matures.


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