RAK claims its place in the sun

While Dubai and Abu Dhabi often draw all the attention when it comes to real estate, another emirate is quietly growing its property portfolio. Ras Al Khaimah (RAK) might not be able to compete with the former two in terms of market size, but it brings in a different proposition that adds value to the real estate landscape in this part of the world.

With a coastline stretching 64km, RAK offers huge potential to develop a large number of waterfront properties at drastically lower prices than in Dubai and Abu Dhabi.

Traditionally, RAK was a favourite of price-conscious people who wanted to buy or rent a spacious property and live in a peaceful environment. But things started to change a decade ago when the emirate decided to go for a massive transition by developing Al Hamra Village, a 77-million-sq-ft residential and leisure development that includes villas, apartments, a mall, restaurants, golf courses and hotels.

The emirate started to attract a lot of leisure travellers and investors, and it later became evident that RAK was not only good for those looking for a second home, but was also a great location for a primary residence, being only a 45-minute drive from Dubai.

“Al Hamra Village is home to more than a thousand villas and more than 3,000 apartments. We have completed and handed over all projects that we have launched to date,” says Barry Ebrahimy, Head of Sales and Marketing at Al Hamra Real Estate Development (Ahred), which is now planning two new projects at Al Hamra Village — a signature villa development on a central island within the development and the Bayti project with three- and four-bedroom villas. “Both projects will be launched in the first quarter.”

Improved infrastructure

The emirate initially faced some infrastructural hurdles that caused delays in the execution of many real estate projects. A number of developers that announced ambitious projects soon had to cancel or adjust timelines due to a lack of infrastructure for electricity, sewerage, roads, etc. But a Dh5.7-billion investment in water and electricity infrastructure announced by the Federal Government in 2011 turned things around.

For instance, Al Marjan Island, one of the emirate’s most ambitious projects, is now progressing rapidly with various infrastructure work.

“After key decisions to bring in new management for RAK Investment Authority and creating a separate company for Al Marjan Development Island, which is dedicated to the development of Al Marjan Island, the entire Al Hamra region of new RAK is showing rapid development and growth,” says Frank Khoie, Group Chairman of Khoie Group, which acquired 1.5 million sq ft of prime waterfront land on Al Marjan Island for residential, commercial and hotel projects, but had to stop work due to the lack of infrastructure and the difficult economic scenario in 2008.

While many companies shut down and projects were cancelled, Khoie Properties and a few other major developers were able to endure the downturn.

“Phase one of our La Hoya Bay project, which consists of 662 apartments, is 100 per cent sold out,” says Khoie. “Piling has been completed and construction will restart this year as soon as the master developer of Al Marjan Island is ready to deliver the required electricity and other infrastructure components, which we are confident will be done during the first quarter.”

Besides Khoie Group, Ahred and Al Marjan, RAK Properties is another major developer in the emirate that is behind one of the RAK’s largest master-planned developments, Mina Al Arab, which, along with Al Marjan Island, is located on the eastern coast of the emirate, offering a mix of predominantly hospitality and residential properties to both local and foreign investors.

“Mina Al Arab has already seen the delivery of residential apartments and town houses, with future development more focused on hotels,” says Mat Green, Head of Research and Consultancy — UAE at CBRE Middle East.

“A number of five-star properties with internationally recognised operators have been proposed and are set to be completed over the next five years, as part of the emirate’s wider tourism development strategy that is predominately focused on luxury resort developments.”

Similar to other markets in the Middle East, RAK is seeing a return of positive sentiment in its real estate market. Last year’s Cityscape Global in Dubai reflected the improving confidence in the emirate when RAK Properties sold almost half of its 104 waterfront Flamingo Villas as well as two 20-storey apartment buildings in Lagoon Heights in just a few days.

“RAK Properties’ Mina Al Arab, just a few miles from Al Hamra Village, is almost complete and much of it is already sold,” says Khoie. “Bab Al Bahar, at the entrance of Al Marjan Island, is nearly complete, while La Hoya Bay will resume construction this year.

“The whole area is going through a major development as markets are coming back and RAK, playing as the best weekend destination for Dubai residents, is benefitting from the market rebound.”

Investor friendly

But it wasn’t a smooth ride for the emirate. Sharing the experiences of their peers from other emirates, developers in RAK felt the heat during the economic downturn. But now they claim the market has matured with authorities putting in safeguards for investors and market stakeholders. Among the measures taken was the creation of the RAK Real Estate Regulatory Agency in 2008, while developers are now required to open an escrow account, providing additional security to buyers.

“Like Dubai, RAK went through a learning curve in off-plan sales and was hit by the global economic crisis,” says Khoie. “Now it is on the comeback trail, with tighter and more transparent rules and regulations, greater discipline and security for developers.”

Promoting tourism

In addition, RAK is also one of the most investor-friendly destinations in the region as it offers freehold ownership in Al Hamra Village to all nationalities. To promote trade and business, the government has set up two major free zones — RAK Free Trade Zone and Ras Al Khaimah Investment Authority (Rakia) free zone.

“With these free zones, investors find it very cost-efficient to set up and operate a business in RAK,” says Ebrahimy. “The emirate also offers Rakia Offshore as a set-up similar to those being offered in British Virgin Islands and Mauritius.”

Although its economy is dominated by the industrial, business, agricultural and services sectors, RAK recognises the potential to position itself as an affordable global destination for leisure, adventure and business travel. The RAK Government has therefore invested $500 million (Dh1.84 billion) in tourism development projects as of last year, helping increase the total number of visitors to 1.2 million last year. The investment is also poised to bring the emirate’s total hotel and resort room inventory to 10,000 keys by 2016.

Al Hamra Village, a first-of-its-kind community development in the region, has five hotels and resorts, including the recently completed Waldorf Astoria, a Hilton Worldwide brand. The 442-room Crowne Plaza Ras Al Khaimah is also scheduled to open on Al Marjan Island next year.

“Al Marjan Island has a very strong hospitality focus, with the recent completion of Hilton’s second DoubleTree by Hilton property in the emirate, and upcoming properties such as Rixos Bab Al Bahr and Santorini Hotel and Residences,” says Green. “Between this year and the next, we expect the delivery of around 1,500 new hotel keys.”

In May 2011, the government also signed an agreement with Rakeen Development to complete the acquisition of Banyan Tree Al Wadi. RAK’s Tourism Development Authority is currently reviewing plans to expand and upgrade the exclusive desert resort, with an extension plan for the villa complex.

On the other hand, Al Marjan Island, the first man-made island project to be developed in RAK, is being built at a cost of more than $1.8 billion, according to government estimates. The 2.7-million-sq-m project will consist of a cluster of five coral-shaped islands.

Its natural beauty and picturesque beaches have made RAK a great getaway destination for many Dubai and Abu Dhabi residents. It has been described as a hidden gem, especially by tourists looking for a less-crowded environment and a slower pace of life.

Villa demand

“Waterfront apartments for retirees and holiday makers are in great demand, which is why La Hoya Bay’s apartments were sold out and other phases in the La Hoya Bay complex will be launched this year,” points out Khoie.

Ebrahimy, on the other hand, points out that villas are in higher demand than apartments. “Within the villa segment, the larger waterfront villas have the highest demand,” he says. “Luxury villas have doubled in price in the last 12 months, while apartment values are moving up by approximately 18 per cent.” Ebrahimy adds that demand for homes in Al Hamra Village has been increasing steadily, prompting the development of 150 new luxury villas to be added to its portfolio this year.

Positive outlook

High-profile branded projects such as the Real Madrid Resort Island and the Sha Rukh Khan Boulevard reaffirmed the strong interest in Ras Al Khaimah’s real estate potential. Although the Real Madrid project eventually fell through, the emirate continues to attract serious attention from local and foreign investors, especially with the region’s property sector starting to gain ground.

Moreover, the northern emirates are also benefiting from Dubai’s strong recovery, with demand for residential properties rising as cost-sensitive occupiers seek affordable alternatives. “This has been most noticeable in the border areas that offer good connectivity with Dubai,” says Green. “We expect this trend to continue throughout the year, with rental rates expected to maintain their upward trajectory.”

According to a report from Asteco, rents in all northern emirates rose last year, with RAK registering a year-on-year hike of 18 per cent. “The annual rent for a two-bedroom apartment in RAK is now up to Dh50,000 per annum,” the report states.

Experts believe RAK will be a natural beneficiary of any increase in tourism and investment in the UAE, particularly in Dubai. As property prices surge in some areas of Dubai, it is expected to encourage more investors to look elsewhere — and RAK should be a natural choice.

“RAK is directly affected by the price increase in Dubai,” says Khoie. “As prices have risen 35 to 50 per cent in some areas in Dubai, prices are also rising in new RAK areas such as Al Hamra Village and Marjan Island.

“No one is expecting to see the dizzying prices of 2008, but the growth is certainly there and it will stay.”

Khoie strongly feels Al Marjan Island is a place to watch out for in the next few years, describing it as the most beautiful waterfront real estate in the UAE.

Moreover, with Dubai hosting the World Expo 2020, other emirates are also expected to benefit from it in the long term. “The impact [of the World Expo] is unlikely to be felt in the short term until major infrastructure and development projects are commissioned and new employment starts to rise,” says Green.