Dubai: Get private developers back into the game — if Abu Dhabi’s whopping Dh50 billion stimulus package achieves that, it would be just the boost its property market needs.
For too long now, the real estate sector in the emirate had been reliant on government-owned developers and those associated with financial institutions were doing much of the hard yards. That could finally change.
The stimulus package specifically states that there will be a full-on “review of building regulations for infrastructure, residential properties, commercial and industrial sectors,” the Government had said in a statement on plans for the real estate sector. This, it added, would “help reduce costs for citizens, residents and investors”.
According to Vaibhav Sharma, Chief Strategy Officer at MPM Properties and part of the Abu Dhabi Islamic Bank, “We are aware of multiple small- to mid-sized developers who have shown interest in exploring opportunities to develop projects in Abu Dhabi. This [the stimulus] will go a long way in encouraging them to proceed with their projects. These will now have better demand visibility.”
The wording of the announcement on cost to “residents” is particularly significant. This could be the signal to the real estate sector for specific solutions that address the need for more affordable housing in the emirate. Sharma calls it as helping with a “market-aligned approach”.
“A fair number of residents have been adopting a cautious approach in recent months, and this will encourage them to invest in Abu Dhabi real estate, which offers annual returns of 7-8 per cent net,” said Sharma.
Market sources say businesses holding land could now be induced to put this to good use. So much of development activity has centred in and around the main island, and this could now be pushed outwards to take in more regions.
Alliance between Aldar and Emaar
This is the third major real estate focused initiative Abu Dhabi’s real estate sector has been witness to since the start of the year. First was the announcement of an alliance between Aldar and Emaar to jointly develop projects in Abu Dhabi and Dubai, with a figure of Dh30 billion mentioned in the initial phase.
Then came Aldar’s acquisition of land held by TDIC, including sizeable parcels on Saadiyat Island. This deal was pegged at Dh3.7 billion.
The Dh50 billion stimulus is also in line with federal level announcements made just recently.
According to Prasanth Manghat, CEO and Executive Director of NMC Health, “The timing is significant as it comes within few weeks of the new visa and foreign ownership rules. The [latest] plan promises to cover infrastructure, SMEs, industrial and social projects. Real estate stands to benefit immensely.”
The ecotourism plans — another part of the stimulus strategy — “shall surely offer a large-scale development of land holdings and again giving a major boost to the real estate.”
It will also be interesting to see how another component of the stimulus will impact on the property market.
All new commercial licences issued by the emirate exempts businesses from having to invest or lease offices. The exemption applies for a two-year term and the business owners can operate through “permanent home licences”.
