Dubai: Affordability does come at a price — apartment and villa sizes at some of the recent off-plan launches in Dubai are smaller than what they used to be during the 2005-2008 phase and also between 2012 to mid-2013.
The shaving off of floor space could be as much as “20 per cent in the villa space and upto 18 per cent in the apartment space in monitored areas [and] taking into account the major developers,” said Sameer Lakhani, Managing Director at Global Capital Partners. “This has been done by a combination of increasing balcony spaces as well as reducing the actual carpet area of the development.”
Developers believe that by reducing property sizes, they can bring down the overall value of what is being offered and thus entice end-users to come on board. For instance, if the property value can be got down to Dh1 million to Dh1.5 million from Dh2 million plus by cutting down on livable area, the trade-off works for both parties.
But is such a trade-off fair? Even if they do reduce the overall property value, developers are not exactly doing the same with their per square foot pricing.
And developers have been playing hard and fast with the areas marked out for balconies, often ‘padding up’ the area marked as balcony as part of the overall built-up area of the apartment itself.
Budget-conscious buyers, in particular, need to get their calculators out and do the sums they are getting what they had in mind.
“In certain cases, there have been developments where the balcony area is upto 50 per cent of the overall area,” said Lakhani. “Typically, when developers buy plots of land, they are allotted a ‘floor area ratio’ [FAR] or ‘built-up area’.
“This tells the developer what the zoning and the maximum permissible areas are to build. In these calculations, balconies are not included.
“In developer lingo, they are referred to as “Free of FAR”. This in turn creates an incentive for the developers to increase balcony spaces and charge the entire area as salable, thereby increasing their revenue and profitability. This is a worldwide phenomena and we have seen this in Dubai as well, more so recently, both in the premium space as well as in the affordability space of the market.”
This applies to investors in office spaces as well. Recently, an investor found to his considerable shock that an office unit of 800 plus square feet was “retro-sized” to just over 400 square feet. “I have made payments of 85 per cent on this tower project in Business Bay which after many years is nearing completion,” said one of the investors.
“The original developer had sold to another investor-developer, and it was the new developer who drastically pared down the sizes without giving any explanation. There were other buyers who had bought much larger offices and who are also facing a similar situation.
“In the new SPA [sales purchase agreement], the area is reduced by more than 44 per cent — but the total price has been kept same with a negligible discount on total balance payable amount.
“The worst part is that even after cutting it down to a 400 plus square feet, the ‘carpet area’ is only around 235-250 square feet. My contention is that the final amount should be adjusted as per the area being given to the buyers and accordingly it should be incorporated in the new SPA.”
The buyer has filed for a legal review with the Dubai Land Department and is awaiting a decision.