Dubai: Dubai’s master-developers are cottoning on to a good thing — sell plots for investors to come up with their own concepts (or those that are largely in sync with developer benchmarks) rather than offer ready-made villas. By doing so, many of these projects are recording take-up rates well above the current sales cycle for those only offering pre-built villas.
Meraas’ Jebel Ali Hills development has as many as 2,000 plots ranging between 10,000-16,000 square feet and with land values of Dh115-120 a square foot. The uptake of land has been rated as fairly strong, according to market sources. The project has an estimated completion date of late 2016.
Developers at Mohammad Bin Rashid City have followed course, while Dubai Properties and Nakheel being early adopters with The Villa Community and Jumeirah developments, respectively. Nakheel, in particular, has been an early starter offering these at its multiple developments, most notably at Jumeirah Village, Jumeirah Islands and at the flagship Palm. (The Palm locations, not surprisingly given their pristine locations at the very tips of the “fronds” entail some serious investment outlay for the buyer. With Palm, that comes with the territory.)
Selling plots to investors is not exactly a new trend in Dubai’s freehold marketplace. In the first flush of Dubai opening up the property market, Emirates Hills was the definitive place to be to acquire significantly sized plots and which could then be converted into dream homes.
“But now, developers with sizeable land holdings see plot sales as an integral part of their sales model — and not just confined to a one-off location or two,” said Sameer Lakhani, Managing Director at Global Capital Partners. “Even for the investor, there’s a win-win perspective about such a commitment.
“Our research shows investors could get cost savings of anywhere up to 50 per cent if they build on their own — factoring in a two-year time frame to construct — rather than get a built unit direct from developers. Those are significant savings, and it varies appreciably from cluster to cluster.”
Other dynamics have a walk-on part. In the 13 years since the market was opened up, Dubai has seen an estimated 35,000 villas and town houses being delivered. And a quite substantial 28,000 additional units should be ready in the next five years, as developers pushed through a series of major launches starting 2013. Their intention was to rope in cash-ready investors interested solely in assets at high-end locations.
Then came the softening in the market and which have seen villa values drop by 30 per cent across the board in the last 12 months.
“Even with the dip in prices, values of ‘horizontal’ properties from a developer command a 25 per cent premium over their likely replacement value, which is what it could cost an investor building his own unit. Typically, when you look at the global markets for horizontal developments, anytime there is such a premium, markets soften, which is what has happened in Dubai.”
Meanwhile, developers are taking the concept to the other emirates too. In late March, Aldar Properties parcelled off 281 plots (of 1,000-1,500 square metres) at its Al Merief development in Abu Dhabi. Open only to UAE nationals, the average plot cost was around Dh2 million.
Also, early this year, the MAG Group confirmed a joint venture early this year with Albatha Real Estate Group for the Dh400 million Shoumous Residential Complex in the Al Tai district of Sharjah. There were 220 plots in the first phase.
“It was done to test the market sentiments and what we found that we were actually selling these quicker than what it would have taken us to offer our own units,” said Tariq Bsharat, Executive Director for Strategy and Operations at MAG Property Development. “All the plots would still be serviced by us, in that we take care of the rest of the infrastructure and community needs.
“If we are able to access similar land areas in future [the Shoumous project entails 6.8 million square feet], we could consider similar launches. In fact, Dubai’s outskirts and some of the other emirates offer such possibilities.”