Dubai realtors seek cheap land

By Robert Ditcham, Staff Reporter
Published: August 28, 2007

Dubai: Dubai's private developers will not build much-needed low-cost housing unless the government facilitates cheap land, property developers say.

Ahmad Al Abdullah, chairman of New Dubai Properties, which has a portfolio of 22 projects worth Dh15 billion, says skyrocketing land prices mean developers are mostly building office blocks, hotels or luxurious residential projects, which offer healthier returns on investment than mid- to low-range units.

The fact that purchasing power of residents across the income spectrum is being eroded as house prices escalate is considered a serious threat to Dubai's ability to attract the talent it needs to develop further.

Option

"We will build affordable housing if the government provides us with land at a good price and tells us not to raise rent above a certain level, for example Dh40,000 to Dh50,000 for a two bedroom apartment," said Al Abdullah.

"If the value of a plot is very high, we will only build a project that can cover our initial investment."

Addressing Dubai's stock of low-cost housing has been high on the government's agenda.

Marwan Bin Galita, chief executive of the newly formed Real Estate Regulatory Agency (Rera), recently said the body is developing a comprehensive Real Estate Index to assess the market and make recommendations to the government on proposed regulations.

Meanwhile, the Dubai Urban Development Framework, an initiative which will dictate Dubai's urban development to the year 2020, will address the emirate's decline in housing affordability over the past three years.

Al Abdullah said the price of land represents around 40 per cent of the value of a project, while the rest consists of construction costs, which have also increased significantly.

He said office towers provide developers with significantly more income than residential projects. Of the company's 22 project portfolio, 12 are commercial, six are hotels and only four are residential.

The lack of cheap land in Dubai has forced private developers to consider other emirates including Ajman, where land is significantly cheaper.

Average values continue to climb

According to property services company Asteco, average land values climbed 35 per cent in 2006 and 24 per cent this year. Freehold land at Dubai Marina that was worth Dh160 per square foot (on the built up area) in 2005 is valued at Dh270 per square foot now - a 68 per cent increase.

Meanwhile, at Dubai Waterfront near Palm Jebel Ali, land valued at Dh90 per square feet in 2005 surged to Dh210 per square foot this year - a 130 per cent increase in just two years.