InFocus | Abu Dhabi Properties
All set to scale new heights
It's busy days ahead for Abu Dhabi. The real estate boom has been fuelled by the emirate's ambitious plans for growth across various economic sectors.
- By Esha Nag, Staff Writer
- Published: 00:00 October 29, 2006
- The Abu Dhabi economy is expected to attract more than $4 billion this year in direct foreign investment. That figure is expected to double over the next few years with the establishment of new industrial cities and estates alongside progressive real estate investment and property holding laws.
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The real estate boom has been fuelled by the emirate's ambitious plans for growth across various economic sectors.
It's busy days ahead for Abu Dhabi. The smell of brick and mortar, the glittering, clanking cranes that dot its landscape and the sight of the concrete-filled steel tubes tell you that the capital of the UAE is rising tall.
Slow to join the regional real estate boom, Abu Dhabi now has half-a-dozen real estate companies (formed within the past two years) which are spearheading the transformation of the emirate into a modern Arabian metropolis.
More than $100 billion worth of new real estate projects are now under way here, and names such as Najmat Abu Dhabi, Shams Abu Dhabi and Danet Abu Dhabi have generated enormous media and popular interest.
Until a few years back, Abu Dhabi's construction sector was dominated by oil and gas projects and independent power and water schemes. Major development schemes were announced in the real estate sector, but were either delayed or cancelled. So while Dubai was experiencing a real estate boom, Abu Dhabi was content to just wait and watch. Things, however, began to change with the launch of the Reem Island Development Scheme in 2004 and the emergence of Aldar Properties in 2005 - both major milestones in changing the mindset of the local real estate industry.
Major players
All set to take Abu Dhabi's building sector to new heights, the multi-billion-dirham Reem Island development scheme has three major players behind it - Tamouh, Sorouh Real Estate and Reem Investments (each responsible for a certain section of the island).
Since its launch, the project has generated an excellent response with about 1,000 visitors coming in daily. Situated northeast of the capital, the island will be an important destination for business, tourism and education.
Sorouh Real Estate's flagship project is the Shams Abu Dhabi, an entirely new city that will come up on Reem Island and will be integrated into the existing city. The Shams will feature the Gate District - a cluster of eight towers. One of them will be the 83-storey, 379-metre Sky Tower, whose groundbreaking ceremony recently made headlines.
With 598 residential and commercial units, this will be the highest tower in Abu Dhabi and the world's 15th tallest building according to current rankings.
Reem Investments, which is developing 20 per cent of the island, has also launched its star project - Najmat Abu Dhabi. This is the company's first project in the UAE - a 20-million-square-foot community. The buildings will be a mix of traditional Arab and contemporary architecture, and will host a population of more than 80,000 when completed in 2012.
Sorouh is also involved in other projects, including the Golf Gardens, Abu Dhabi Towers and development of Lulu Island and Saadiyat Island.
Aldar Properties' first major project, Al Raha Gardens, was unveiled in June 2005. It was the first development to be offered to nationals in Abu Dhabi on an ownership basis.
Stunning chalets
The Al Gurm Resort followed in November 2005. This was Aldar's first hotel project - a mix of stunning chalets on individual islands along with an all-suite 161-room international luxury hotel centred on a lagoon.
In April 2006 the $15 million Al Raha Beach Development was launched. This entire new city is being built along Abu Dhabi's natural beachfront and will house more than 120,000 residents.
The Abu Dhabi Tourism Authority (ADTA) is expected to play a major role in this real estate boom by positioning the emirate as a hot tourist destination.
Saadiyat Island has been given a fresh impetus by ADTA with the announcement of a Dh100 billion development scheme. In addition, ADTA intends to come up with a host of mega-hotel projects, plans for which have already been laid out early this year.
According to Ventures Middle East, a leading management consultancy firm in the region, Abu Dhabi's building construction industry is expected to witness the award of more than Dh22 billion worth of projects to contractors by the end of 2006. This figure is expected to exceed Dh28 billion in 2007.
Keeping in mind the not-so-high-end spender, the Abu Dhabi Executive Council has also given its approval to the blueprint for a number of residential localities in Abu Dhabi. Going by media reports, plans are on to develop 18,000 housing units at a cost of Dh22 billion over the next three years on a public-private partnership basis.
Property experts feel that the real estate boom in Abu Dhabi has been fuelled by the government's ambitious plans for growth across various economic sectors.
However, the key factor has been Abu Dhabi's newly enacted property law of 2005, which enables citizens to own land and property in the emirate. As a spokesperson from Sorouh explains: "The law also enables expatriates to invest in properties on the basis of the 99-year leasehold agreements with developers."
For many expatriates Abu Dhabi is indeed the ultimate place to invest. It's not just the natural beauty, the world-class shopping malls, state-of-the-art transport system and great healthcare facilities that make Abu Dhabi extremely attractive. The UAE capital also boasts of no foreign exchange controls or trade barriers, strong investor incentives, one of the highest per capita incomes in the world, a stable economy and political stability.
"People have suddenly realised that it makes sense to be in the capital. The opportunities are immense and people are now making the most of it. Annually the place is witnessing 10 to 15 per cent growth in the property market and business sector," says Rafiq Masters, Manager, Real Estate Division, Cassells Group.
Economic boom
The economic boom has helped the entry of several new players in the market. Start-up companies are being launched at regular intervals, and the flurry of activities has made the world sit up and take note.
As Linda Loughnane, Managing Director of LLJ Property, says: "The growth of the tourism industry, especially the astronomical expansion of the Etihad Airlines, the development of manufacturing and automobile industries, which are all high-skilled areas," have set the momentum for Abu Dhabi's economic growth.
Residential properties in Abu Dhabi are now at a premium and owing to the pro-business environment the demand for office space is also likely to rise substantially.
"Annual rent for a two-bedroom apartment has gone up from Dh50,000 to Dh85,000 and that for three-bedroom apartments has gone up from Dh85,000 to Dh130,000 - all within the last year. In case of commercial properties, the cost per square metre has gone up from Dh2,000 to Dh3,500 and is still rising," says Masters.
Moreover, investors who missed out on the Dubai real estate boom have now shifted their attention to Abu Dhabi. And even if critics are quick to point out that it will take some time before the emirate actually delivers its mega projects to investors, no one is ready to back out.
Property investment
In the world of property investment, a little patience can pay big dividends. Presently property rates in Abu Dhabi are still low compared to other international cities, and it will be hard to not make a profit from such an opportunity, say those in the industry.
"What Abu Dhabi needs is good marketing. It should make a noise about its growth," says Masters.
The development pattern of Abu Dhabi has so far been similar to that of Dubai - a small number of initial projects have attracted headline-grabbing sellouts, and confirmed the public appetite for more.
Now what Dubai can best show Abu Dhabi is a lesson in marketing and public relations. Dubai property companies have done a superb job in getting their message reported around the globe on television, internet, newspapers and magazines. "Abu Dhabi is the world's best kept secret... it has been sitting and learning from the urbanisation taking place in Dubai and other areas in the Gulf," says John Shaw, Chief Investment Officer, Aldar Properties.
"Dubai has created a particular image of itself, but Abu Dhabi doesn't want to replicate that. It is careful, confident, and conservative. The marketing exercise is being built up slowly in both Asia and Europe... we have been careful to identify users and investors who can come here and add value."
As Abu Dhabi starts luring foreigners and nationals into buying property, banks in the region are coming up with new schemes. However, for the moment, the key word is trust.
Emirates Bank International, the UAE's second-biggest lender by assets, plans to offer home loans to foreigners. Abu Dhabi-based property developer Aldar Properties has signed an agreement with Barclays Bank to fund its new development projects. The investment is the first by an international bank in the real estate sector in Abu Dhabi and the move reflects the growing investor confidence in the emirate.
According to officials of the National Bank of Abu Dhabi, most of the local and foreign banks have also increased their activities in the mortgage market, expanding their services to UAE nationals, expatriates and non-resident customers due to the recent boom in freehold and leasehold property in the country.
The local banks are heavily involved in new mortgage business, offering flexible mortgage services with attractive features, enabling most of the UAE residents and non-residents to apply to buy and invest in the real estate market.
Competitive schemes
Foreign banks have entered the market on a smaller scale with services such as providing mortgages on a case-by-case basis with more competitive schemes.
The National Bank of Abu Dhabi has also signed an agreement with Sorouh Real Estate enabling property buyers access to NBAD's unique Escan home financing package. The Escan scheme offers loans from Dh150,000 to Dh8 million, and is available for all aspects of property acquisition, extension and maintenance, for a maximum of 25 years. The minimum loan for non-resident second homebuyers is Dh500,000. Repayments can be made monthly, or annually in the case of investment.
According to investment advisory firm RSP Group, the population of Abu Dhabi will double in the next 10 years to about two million. At an international real estate and investment show held recently in Abu Dhabi, it was estimated that the emirate would require 250,000 new homes over the next decade to meet increased domestic and international demand.
For most residents of Abu Dhabi, who have so far been paying high rents, the new projects spell hope. It has made them look forward to investing into their own homes and seeing capital growth. It is estimated that the new buildings will create at least one million square metres of space against an immediate demand of three to four million square metres.
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